Assigned to APPROP & FIN FOR
COMMITTEE
Assigned to APPROP & FIN FOR
COMMITTEE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
family caregiver income tax credit.
Purpose
Creates, beginning in Tax Year (TY) 2019 and ending before TY 2027, an individual income tax credit (tax credit) for the care and support of a qualifying family member. Outlines various tax credit limitations and eligibility criteria.
Background
The term tax credit refers to a dollar-for-dollar reduction of a taxpayer's income tax liability. Tax credits differ from tax subtractions, exemptions or deductions, which reduce the amount of income that will be taxed. Tax credits are either refundable or non-refundable. Non-refundable tax credits differ from refundable tax credits in that they can never exceed a taxpayer's tax liability. Many non-refundable tax credits, however, permit the unused amounts of the credit to be carried forward to future years (JLBC 2017 Tax Handbook).
The state of Arizona allows tax credits for both the individual tax and corporate income tax categories. Tax credits are generally designed to incentivize certain types of behavior, including those activities that may have a beneficial impact on the economy.
Pursuant to Laws 2002, Chapter 238, any new individual or corporate income tax credit that is enacted by the Legislature must include the following in its enabling legislation: 1) a specific review year for the Joint Legislative Income Tax Credit Review Committee to review a tax credit, which must be the fifth full calendar year following the date the tax credit is enacted; and 2) a purpose clause that explains the rationale and objective of the tax credit (A.R.S. § 43-223).
This legislation would reduce state General Fund revenues by a maximum of $500,000 annually, beginning in TY 2019.
Provisions
1. Creates, beginning in TY 2019 and ending before TY 2027, a tax credit for qualifying expenses incurred by a taxpayer for the care and support of a qualifying family member in the taxpayer's home.
2. Outlines the following eligibility criteria to qualify for the tax credit:
a. the taxpayer must file a return as an Arizona resident;
b. the taxpayer's Arizona gross income, together with any Arizona gross income of each qualifying family member, in the applicable TY does not exceed:
i. $75,000 for a single person or a married person filing separately; or
ii. $150,000 for a married couple filing a joint return.
c. the taxpayer must incur qualifying expenses during the applicable TY for the care of one or more qualifying family members; and
d. the taxpayer must submit, with the claim for the tax credit, the applicable qualifying family member's name, taxpayer identification number and relationship to the taxpayer.
3. Specifies that the amount of the tax credit is equal to 50 percent of the qualifying expenses incurred during the applicable TY but not to exceed the following amounts:
a. for a single taxpayer or head of household, $1,000 for each qualifying family member;
b. for a husband or wife filing a joint return, $1,000 for each qualifying family member; or
c. for a husband or wife who file separate returns for the applicable TY in which they could have filed a joint return, one-half of the tax credit that would have been allowed for a joint return.
4. Specifies that qualifying expenses must relate directly to the care or support of a qualifying family member and include the following:
a. improving or altering the taxpayer's primary residence, whether owned or rented, to enable or assist the qualifying family member to be mobile, safe or independent;
b. purchasing or leasing equipment to enable or assist the qualifying family member to carry out one or more daily living activities; and
c. acquiring goods, services or support to assist the taxpayer in caring for the qualifying family member, including:
i. employing a home care aide or personal care attendant;
ii. securing adult day care;
iii. transportation;
iv. legal or financial services; or
v. assistive care technology.
5. Specifies that qualifying expenses do not include the following:
a. regular food, clothing, transportation expenses or gifts provided to the qualifying family member;
b. ordinary household maintenance or repair not directly related to and necessary for the care of the family member; and
c. any amount paid or reimbursed by insurance or by the federal government, the state or a political subdivision.
6. Stipulates, for cases where married persons file separately, that only one spouse may claim the tax credit.
7. Requires, for instances where more than one taxpayer qualifies for the tax credit with respect to the same qualifying family member in the same applicable TY, that the allowed tax credit limits be apportioned between or among the qualifying taxpayers according to the respective expense amounts incurred.
8. Prohibits a taxpayer who claims the tax credit from being eligible to claim the tax credit again for three consecutive TYs, with exception for instances:
a. where the amount of the allowable tax credit in the applicable TY exceeds the taxes that are otherwise due; or
b. where there are no taxes due.
9. Allows, in the above instances, the taxpayer to carry the unused tax credit amount forward for up to three consecutive TYs. Following that time period, any unused tax credit amount is waived and may not be refunded, transferred or otherwise used to offset taxes.
10. Specifies that the tax credit is in lieu of the existing $10,000 tax exemption for each parent or ancestor of a parent of a taxpayer:
a. who is age 65 or older;
b. who requires assistance with activities of daily living;
c. who lives in the taxpayer's principal residence for the entire TY; and
d. for one-half of whose support and maintenance costs the taxpayer pays for.
11. Requires a taxpayer, before filing a tax return and claiming the tax credit, to apply to DOR for certification of the tax credit on a DOR-prescribed form.
12. Restricts DOR to only accepting tax credit applications beginning January 1 through January 31 of the year following the calendar year for which the tax credit is being requested.
13. Requires DOR to approve and certify tax credit applications that were correct and complete on a first-come, first-served basis.
14. Prohibits DOR from approving and certifying tax credits that exceed $500,000 in the aggregate for any calendar year.
15. Requires DOR to deny any subsequent tax credit application that would exceed the above aggregate dollar limit.
16. Defines qualifying family member as an individual who:
a. is at least 18 years of age during the applicable TY;
b. requires assistance with one or more daily living activities, as certified by a licensed physician; and
c. is the taxpayer's spouse, the taxpayer's or spouse's dependent child, grandchild, stepchild, parent, stepparent, grandparent, sibling, uncle or aunt, whether by blood or through adoption.
17. Adds the tax credit to the statutory income tax credit review schedule.
18. Makes technical and conforming changes.
19. Contains a purpose clause.
20. Repeals tax credit statute added by this legislation on July 1, 2027.
21. Becomes effective on the general effective date.
House Action
WM 1/17/18 DP 7-2-0-0
3rd Read 2/20/18 45-14-1
Prepared by Senate Research
March 23, 2018
FB/lat