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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
VETOED
AMENDED
FACT SHEET FOR S.B. 1143/h.b. 2522
conformity; internal revenue code; rates
Purpose
Conforms Arizona tax statutes to the Internal Revenue Code (IRC) as of January 1, 2019, and offsets rates for taxable year (TY) 2018.
Background
The Arizona Legislature periodically updates statutory definition of the IRC to include any federal provisions that became effective in the preceding calendar year as a means of paralleling the computation of Arizona income tax and other statutory references throughout the Arizona Revised Statutes to the amended IRC. Tax conformity with the IRC is deemed necessary because the calculation of Arizona corporate income tax liability begins with federal taxable income. Similarly, federal adjusted gross income is the starting point for individual income tax assessment.
The federal Tax Cuts and Jobs Act enacted on December 22, 2017, includes over 100 provisions and represents the largest revision to the IRC in more than 30 years. The latest estimate of impact detailed by the Joint Legislative Budget Committee (JLBC) states that the impact of fully conforming to these IRC changes would be a revenue gain of approximately $155 million.
According to the JLBC, the fiscal impact to the state General Fund associated with this legislation would be approximately $2 million. The JLBC now scores IRC conformity at +$155 million, and the 0.11 percentage point reduction in this legislation equals approximately -$157 million.
Provisions
1. Updates, for income tax purposes, for the TY beginning from and after December 31, 2017, through December 31, 2018, the definition of IRC to mean the IRC 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 and the Consolidated Appropriations Act of 2018 that are retroactively effective during TYs beginning from and after December 31, 2017, through December 31, 2018.
2. Reduces the statutory income tax rates by 0.11 percentage points for the TY beginning from and after December 31, 2017, through December 31, 2018.
3. Resets the income tax rates to statutory levels for TYs beginning from and after December 31, 2018.
4. Repeals this act from and after December 31, 2019.
5. Applies retroactively to tax returns filed for TYs beginning from and after December 31, 2017.
6. Becomes effective on signature of the Governor, if the emergency clause is enacted.
Amendments Adopted by Committee
· Clarifies the retroactivity clause.
Governor's Veto Message
The Governor indicates in his veto message that any bill with a fiscal impact should be considered as part of budget discussions agreed to by the Legislature and Executive.
Senate Action House Action
FIN 1/28/19 DPA 6-4-0 WM 1/28/19 DPA 6-4-0-0
3rd Read 1/31/19 16-14-0 3rd Read 1/31/19 31-29-0
(S.B. 1143 was substituted for H.B. 2522 on
3rd Read)
Vetoed by the Governor 2/1/19
Prepared by Senate Research
April 12, 2019
CS/kja