HB2204 - 531R

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

Section 1. Laws 2016, chapter 125, section 21 is amended to read:

Sec. 21. Veterans' income tax settlement fund; exemption from lapsing

A. The veterans' income tax settlement fund is established consisting of monies appropriated by the legislature and other monies donated or accruing to the fund. Monies in the fund are continuously appropriated to the department of revenue for the purposes of Laws 2016, chapter 125, sections 19 through 27 of this act.

B. The department of revenue shall administer the fund. On notice from the department, the state treasurer shall invest and divest monies in the fund as provided by section 35-313, Arizona Revised Statutes, and monies earned from investment shall be credited to the fund. Monies in the fund are exempt from the provisions of section 35-190, Arizona Revised Statutes, relating to lapsing of appropriations, except that unexpended and unencumbered monies remaining in the fund on June 30, 2019 2021 revert to the state general fund.

C. Five percent of the monies in the fund at the beginning of each fiscal year are appropriated separately to both the department of revenue and the department of veterans' services for administrative costs incurred under Laws 2016, chapter 125, sections 19 through 27 of this act during the fiscal year. Any unexpended and unencumbered balance of either appropriation remaining at the end of the fiscal year reverts to the fund.

Sec. 2. Laws 2016, chapter 125, section 22 is amended to read:

Sec. 22. Income tax settlement claims; requirements; procedure; approval or denial of claim

A. A veteran or, if the veteran is deceased, the veteran's surviving spouse, personal representative, executor or other official representative of the estate, as designated pursuant to applicable state or tribal law or tradition, may file a claim for a settlement payment for any period of active duty in the armed forces of the United States during which the veteran:

1. Was an enrolled member of a tribe.

2. Maintained a domicile within the boundaries of the veteran's reservation or the reservation of the veteran's spouse or within the boundaries of lands held in trust by the United States for the benefit of the veteran, the veteran's spouse or the tribe of the veteran or spouse.

3. Had Arizona state income tax withheld from the veteran's active duty military pay on or after September 1, 1993 July 1, 1977 and before January 1, 2006, and the amount withheld:

(a) Has not already been refunded to the veteran or the deceased veteran's estate.

(b) Cannot be claimed as a refund by filing a state income tax return because the period for filing a claim for refund has lapsed under the applicable statute of limitations.

B. The claim for a settlement payment must include evidence of the veteran's eligibility for and the amount of the claim as follows:

1. The claimant must provide a copy of the veteran's certificate of release or discharge from active duty (DD Form 214) or other proof of service provided by the United States department of defense and approved by the department of veterans' services. If a claimant does not have a copy of the veteran's DD Form 214 or other proof of service, the claimant may request that the department of veterans' services request the veteran's DD Form 214 or other proof of service from the United States department of defense.

2. The claimant must provide a statement, signed by the claimant, that the veteran is or was duly registered on the tribal rolls of a tribe during the period or periods of the veteran's active duty in the armed forces.

3. The claimant must provide evidence of domicile within the boundaries of the veteran's reservation or the reservation of the veteran's spouse or within the boundaries of lands held in trust by the United States for the benefit of the veteran, the veteran's spouse or the tribe of the veteran or spouse during the taxable years the state income tax was withheld from active duty military pay. If the veteran's address shown on the veteran's DD Form 214 or other proof of service:

(a) Is on the veteran's tribal land, that evidence is sufficient for the purposes of this paragraph.

(b) Is not on the veteran's tribal land or if the veteran has no DD Form 214 and the claimant cannot otherwise establish that the veteran's domicile was on the veteran's tribal land, the claimant must provide a signed statement, under penalty of perjury, that the veteran was domiciled on tribal land during the period or periods the state income tax was withheld. The statement must include the veteran's address on the tribal land for each period, and an official designated by the tribe must attest that each address is on tribal land.

4. The claimant must provide evidence of the amount of state income tax withheld from active duty military pay by providing copies of the United States internal revenue service Form W-2 covering active duty military pay for the year or years during which state personal income tax was withheld. If the claimant does not have copies of the applicable Form W‑2 for one or more of those years, the claimant may request that the department of revenue obtain the veteran's Form W-2, or other withholding information in a form approved by the department of revenue, from the United States department of defense.

5. The claimant must provide a signed statement attesting, under penalty of perjury, that the veteran has not received a refund of the state income tax withheld for the years for which the claimant is filing a claim for a settlement payment.

C. A claim for settlement payment under this section must be filed by the eligible veteran or, if the veteran is deceased, by the veteran's surviving spouse, successor or other personal representative. The following apply if the claim is made for a deceased veteran:

1. The claimant must include a copy of the veteran's death certificate or other proof of death.

2. If the veteran's estate exceeds thirty thousand dollars, only the surviving spouse, personal representative, executor or other official representative of the estate, as designated pursuant to applicable state or tribal law or tradition, may file the claim.

3. If the claimant is a successor who is not the surviving spouse, personal representative, executor or other official representative of the estate, the claimant must include a dated and notarized statement, signed under penalty of perjury, that:

(a) The value of the entire probate estate of the deceased veteran, wherever located, minus liens and encumbrances, does not exceed thirty thousand dollars.

(b) At least thirty days have elapsed since the veteran's death.

4. If the claimant is a personal representative, executor or other official representative of the estate, the claimant must include:

(a) A signed, dated and notarized statement that the claimant has been duly appointed as the personal representative, executor or other representative of the veteran's estate pursuant to applicable state or tribal law or tradition.

(b) A copy of the claimant's appointment.

D. A claim for a settlement payment shall be denied for any amount of withholding tax that can be claimed as a refund by filing a state income tax return pursuant to title 43, Arizona Revised Statutes. A state income tax return may be filed by a veteran to claim the refund by the later of December 31 of the year three years after:

1. The veteran separated from military service.

2. The year in which Arizona withholding tax was withheld from the veteran's active duty pay.

E. A claim for a settlement payment must be made on a claim form prescribed by the department of revenue and filed with the department of veterans' services.

F. The department of veterans' services shall not accept claims submitted from and after December 31, 2017 2019.

G. Within two hundred ten days after receiving a complete and correct claim form, the department of veterans' services shall determine whether the claim meets the requirements of subsection B, paragraphs 1, 2 and 3 of this section, transmit qualifying claim forms to the department of revenue and notify the claimant of the department's approval or denial. The failure of the department of veterans' services to respond within two hundred ten days after receiving a complete and correct claim form is considered to be a denial.

H. Within two hundred ten days after receiving the claim form from the department of veterans' services, the department of revenue shall determine whether the claim meets the requirements of subsection A, paragraph 3 and subsection B, paragraphs 4 and 5 of this section and notify the claimant and the department of veterans' services of its approval or denial. The failure of the department of revenue to respond within two hundred ten days after receiving the claim form is considered to be a denial.

Sec. 3. Laws 2016, chapter 125, section 26 is amended to read:

Sec. 26. Veterans' income tax settlement; annual reports

The director of the department of revenue shall report the following information to the senate appropriations and finance committees and to the house of representatives appropriations and ways and means committees on or before October 1 in each of years 2017 through 2019 2021:

1. Estimates of the amount of state income tax withholdings subject to payments under Laws 2016, chapter 125, sections 22 and 23 of this act.

2. The number of veterans affected by withholdings subject to payments under Laws 2016, chapter 125, sections 22 and 23 of this act.

3. Expenditures from the veterans' income tax settlement fund during the previous fiscal year.

4. Anticipated expenditures from the veterans' income tax settlement fund during the current fiscal year.

5. Anticipated appropriations to the fund necessary to meet expected payments in the next fiscal year.

Sec. 4. Laws 2016, chapter 125, section 28 is amended to read:

Sec. 28. Repeal

Laws 2016, chapter 125, sections 19 through 26 of this act are repealed from and after December 31, 2019 2021.