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SB1106 - 572R - S Ver
Senate Engrossed
internal revenue
code; conformity; deductions
State of Arizona
Senate
Fifty-seventh Legislature
Second Regular Session
2026
SENATE BILL 1106
AN
ACT
amending sections 42-1001, 43-105,
43-301, 43-323 and 43-1022, arizona revised statutes; amending
title 43, chapter 10, article 3, Arizona Revised Statutes, by adding section
43-1030; amending sections 43-1041, 43-1042 and 43-1073.01, Arizona
Revised Statutes; amending title 43, Arizona Revised Statutes, by adding
chapter 18; relating to taxation.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 42-1001, Arizona Revised
Statutes, is amended to read:
START_STATUTE
42-1001.
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. 2. Section 43-105, Arizona Revised
Statutes, is amended to read:
START_STATUTE
43-105.
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 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 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 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) 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. 3. Section 43-301, Arizona Revised
Statutes, is amended to read:
START_STATUTE
43-301.
Individual returns; definition
A. A full-year or part-year resident
individual shall file a return with the department if, for the taxable year,
the individual's gross income was greater than the amount of the standard
deduction allowed under
subsection
section
43-1041,
subsection A
as adjusted for inflation pursuant to section 43-1041,
subsection H
.
B. A nonresident individual shall file a return with
the department if, for the taxable year, the individual's gross income was
greater than the amount under subsection A of this section determined for a
full-year or part-year resident individual multiplied by the
percentage that the individual's Arizona gross income is of the individual's
federal adjusted gross income.
C. In the case of a husband and wife, the spouse who
controls the disposition of or who receives or spends community income as well
as the spouse who is taxable on such income is liable for the payment of taxes
imposed by this title on such income. If a joint return is filed,
the liability for the tax on the aggregate income is joint and several.
D. This section applies regardless of whether an
individual is required to file a return under the internal revenue code or
whether the individual has any federal adjusted gross income for the taxable
year.
E. For the purposes of this section, "gross
income" means gross income as defined in the internal revenue code minus
income included in gross income but excluded from taxation under this title.
END_STATUTE
Sec. 4. 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
H
.
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.
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
H
.
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.
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. 5. Section 43-1022, Arizona Revised
Statutes, is amended to read:
START_STATUTE
43-1022.
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, 2024, 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, 2024, 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, The amount authorized by section 43-1030 for
the taxable year relating to distributions from a pension or retirement
account.
36. for taxable years beginning from
and after December 31, 2024, the amount totaling not more than $6,000 that is
contributed during the taxable year to A retirement account to the extent that
the contributions were not deducted in computing federal adjusted gross
income. The total amount subtracted under this paragraph and section
43-1030 may not exceed $6,000 for a taxpayer who is a single person, a
married person filing separately or a head of household or $12,000 for a
married couple filing a joint return. For the purposes of this
paragraph, "Retirement account" means A Roth individual retirement
account under section 408A of the internal revenue code.
END_STATUTE
Sec. 6. Title 43, chapter 10, article 3,
Arizona Revised Statutes, is amended by adding section 43-1030, to read:
START_STATUTE
43-1030.
Subtraction for distributions from a pension or retirement
account; limits; definitions
A. for taxable years beginning from
and after December 31, 2024, in computing Arizona adjusted gross income, a
taxpayer who is sixty years of age or older during the taxable year may
subtract from Arizona gross income, to the extent not already excluded from
Arizona gross income pursuant to section 43-1022 or the internal revenue code,
an amount totaling not more than $6,000 received from a distribution to a
qualified individual from a pension or retirement account.
B. For a taxpayer whose Arizona gross
income is $75,000 or more for a taxpayer who is a single person, a married
person filing separately or a head of household or $150,000 or more for a
married couple filing a joint return, The subtraction amount prescribed by
subsection A of this section shall be reduced by six percent of the amount that
the taxpayer's income exceeds the amount prescribed by this subsection for the
taxpayer's filing status, but not below zero.
C. The total amount subtracted under
this section and section 43-1022, paragraph 36 may not exceed $6,000 for
a taxpayer who is a single person, a married person filing separately or a head
of household or $12,000 for a married couple filing a joint return.
D. For the purposes of this section:
1. "Pension" means either
of the following:
(
a
) A defined
benefit plan authorized under the internal revenue code paid to an individual.
(
b
) Periodic,
fixed amount retirement payments made by the United States military, the United
States civil service or a state or local government or a private employer to
former employees and surviving spouses of former employees for prior services
performed.
2. "Qualified individual"
means:
(
a
) The
taxpayer, if the taxpayer has attained sixty years of age before the close of
the taxable year.
(
b
) In the case
of a joint return, the taxpayer's spouse, if the taxpayer's spouse has attained
sixty years of age before the close of the taxable year.
3. "Retirement account"
includes:
(
a
) A qualified
retirement plan under sections 401 and 403 of the internal revenue code and an
eligible deferred compensation plan under section 457 of the internal revenue
code.
(
b
) An
individual retirement account under section 408 of the internal revenue code,
including a simplified employee pension as defined in section 408(
k
) of the internal revenue code and a simple retirement account as
defined in section 408(
p
) of the internal revenue code.
END_STATUTE
Sec. 7. Section 43-1041, Arizona Revised
Statutes, is amended to read:
START_STATUTE
43-1041.
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, 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, 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, subject to subsection H of this section
.
The
amount of the standard deduction is the amount of the federal basic standard
deduction determined pursuant to section 63 of the internal revenue code for
the taxpayer's filing status.
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,
H.
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. 8. Section 43-1042, Arizona Revised
Statutes, is amended to read:
START_STATUTE
43-1042.
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. 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. 9. Section 43-1073.01, Arizona Revised
Statutes, is amended to read:
START_STATUTE
43-1073.01.
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. 10. Title 43, Arizona Revised Statutes, is amended by adding chapter 18, to read:
CHAPTER 18
SCHOLARSHIP
GRANTING ORGANIZATIONS
ARTICLE
1. GENERAL PROVISIONS
START_STATUTE
43-1801.
State election to participate; federal tax credit for individual
contributions to scholarship granting organizations
A. This
state elects to participate in the federal tax credit established by section
25F of the internal revenue code for individuals who make qualified
contributions to scholarship granting organizations.
B. The department shall comply with
all federal laws and regulations to administer the federal tax credit
established by section 25F of the internal revenue code to ensure this state is
eligible to participate in taxable years beginning from and after December 31,
2026 and annually submit all of the required information to the United States
secretary of the treasury for participation.�
END_STATUTE
START_STATUTE
43-1802.
Scholarship granting organizations; certification; list; rules
A. A nonprofit organization in this
state that is exempt or that has applied for exemption from federal taxation
under section 501(
c
)(3) of the internal revenue code may
apply to the department for certification as a scholarship granting
organization, and the department shall certify that the scholarship granting
organization meets the requirements of section 25F of the internal revenue code
and the applicable regulations or guidance issued by the United States
secretary of the treasury.
B. On or before January 1 of each
year, the department shall:
1. Submit to the United States
secretary of the treasury a list of the scholarship granting organizations that
are certified pursuant to this section and that are located in this state.
2. Post the list submitted pursuant
to paragraph 1 of this subsection on the department's official website.
C. THe department shall adopt rules
and publish and prescribe forms and procedures necessary to administer this
section.
END_STATUTE
START_STATUTE
43-1803.
Scholarships
From and after December 31, 2026, a scholarship
granting organization that is certified by the department and on the list
submitted pursuant to section 43-1802, subsection B, paragraph 1 may
provide scholarships to eligible students for any qualified elementary or
secondary education expenses to the extent allowed under federal law.
END_STATUTE
Sec. 11.
Retroactivity
This act applies retroactively to
taxable years beginning from and after December 31, 2024.