Assigned to FIN AS
PASSED BY COW
Assigned to FIN AS
PASSED BY COW
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
AMENDED
veterans; increased income tax subtraction
Purpose
Increases the allowable state income tax subtraction for retainer and retirement benefit, annuity and pension pay from the Uniformed Services of the United States (Uniformed Services).
Background
Current statute defines Arizona gross income for individual taxpayers as an individual's federal adjusted gross income for the relevant taxable year, computed pursuant to the Internal Revenue Code. Arizona gross income is then used to compute Arizona adjusted gross income, pursuant to additions and subtractions established in statute (A.R.S. § 43-1001).
Under current law, among the allowable subtractions from Arizona gross income used to arrive at Arizona adjusted gross income is a subtraction of up to $2,500 for benefits, annuities and pensions received from one or more of either: 1) the United States government service retirement and disability fund, retirement or retainer pay of the Uniformed Services, and other federal retirement systems or plans; or 2) the Arizona State Retirement System, other state retirement plans and programs, and retirement plans established by a subdivision of the state (A.R.S. § 43‑1022).
Typically, after 20 years of service, members of the Uniformed Services are eligible for retirement, including pension payments from the federal government. Federal law defines Uniformed Services as the Army, Navy, Air Force, Marine Corps, Coast Guard, the National Oceanic and Atmospheric Administration, and the Public Health Service (37 U.S.C. § 101).
According to the Department of Revenue, there is an estimated negative fiscal impact to the state General Fund of $7,284,300 per year, beginning in Tax Year 2019. This is due to a reduction in personal income tax revenues associated with this legislation.
Provisions
1. Creates a new subtraction from Arizona gross income for benefits, annuities and pensions received as retirement or retainer pay of the Uniformed Services equal to an amount not more than:
a) for Tax Years 2017 and 2018, $2,500;
b) for Tax Year 2019, $6,250; and
c) for Tax Year 2020 and after, $10,000.
2. Becomes effective on the general effective date.
Amendments Adopted by Committee of the Whole
1. Delays, from Tax Year 2018 to Tax Year 2019, the increase in the allowable Arizona gross income tax subtraction for Uniformed Services pension pay to $6,250.
2. Delays, from Tax Year 2019 to Tax Year 2020, the increase in the allowable Arizona gross income tax subtraction for Uniformed Services pension pay to $10,000.
Senate Action
FIN 1/24/18 DP 4-3-0
3rd Read 2/5/18 DPA 18-11-1
Prepared by Senate Research
February 13, 2018
FB/AF/lb