HB2009 - 542R

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

Section 1. Section 43-222, Arizona Revised Statutes, is amended to read:

START_STATUTE43-222. Income tax credit review schedule

The joint legislative income tax credit review committee shall review the following income tax credits:

1. For years ending in 0 and 5, sections 43‑1075, 43‑1079.01, 43‑1087, 43‑1088, 43‑1089.04, 43‑1167.01 and 43‑1175.

2. For years ending in 1 and 6, sections 43‑1072.02, 43‑1074.02, 43‑1083, 43‑1083.02, 43‑1164.03 and 43‑1183.

3. For years ending in 2 and 7, sections 43‑1073, 43‑1080, 43‑1085, 43‑1086, 43‑1089, 43‑1089.01, 43‑1089.02, 43‑1089.03, 43‑1164, 43‑1169 and 43‑1181.

4. For years ending in 3 and 8, sections 43‑1074.01, 43‑1081, 43‑1168, 43‑1170 and 43‑1178.

5. For years ending in 4 and 9, sections 43‑1073.01, 43‑1076, 43‑1081.01, 43‑1084, 43‑1162, 43‑1164.05, 43‑1170.01 and 43‑1184 and, beginning in 2019, sections 43‑1083.03 and 43‑1164.04. END_STATUTE

Sec. 2. Section 43-1021, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1021. Addition to Arizona gross income

In computing Arizona adjusted gross income, the following amounts shall be added to Arizona gross income:

1. A beneficiary's share of the fiduciary adjustment to the extent that the amount determined by section 43‑1333 increases the beneficiary's Arizona gross income.

2. An amount equal to the ordinary income portion of a lump sum distribution that was excluded from federal adjusted gross income pursuant to the special rule for individuals who attained fifty years of age before January 1, 1986 under Public Law 99‑514, section 1122(h)(3).

3. The amount of interest income received on obligations of any state, territory or possession of the United States, or any political subdivision thereof, located outside the state of Arizona, reduced, for taxable years beginning from and after December 31, 1996, by the amount of any interest on indebtedness and other related expenses that were incurred or continued to purchase or carry those obligations and that are not otherwise deducted or subtracted in arriving at Arizona gross income.

4. The excess of a partner's share of partnership taxable income required to be included under chapter 14, article 2 of this title over the income required to be reported under section 702(a)(8) of the internal revenue code.

5. The excess of a partner's share of partnership losses determined pursuant to section 702(a)(8) of the internal revenue code over the losses allowable under chapter 14, article 2 of this title.

6. Any amount of agricultural water conservation expenses that were deducted pursuant to the internal revenue code for which a credit is claimed under section 43‑1084.

7. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under section 43‑1080 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.

8. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43‑1080 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43‑1080.

9. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under either section 43‑1081 or 43‑1081.01 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.

10. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43‑1074.02, 43‑1081 or 43‑1081.01 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43‑1074.02, 43‑1081 or 43‑1081.01, as applicable.

11. The deduction referred to in section 1341(a)(4) of the internal revenue code for restoration of a substantial amount held under a claim of right.

12. The amount by which a net operating loss carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds the net operating loss carryover or capital loss carryover allowable pursuant to section 43‑1029, subsection F.

13. Any wage expenses deducted pursuant to the internal revenue code for which a credit is claimed under section 43‑1087 and representing net increases in qualified employment positions for employment of temporary assistance for needy families recipients.

14. The amount of any depreciation allowance allowed pursuant to section 167(a) of the internal revenue code to the extent not previously added.

15. The amount of a nonqualified withdrawal, as defined in section 15‑1871, from a college savings plan established pursuant to section 529 of the internal revenue code that is made to a distributee to the extent the amount is not included in computing federal adjusted gross income, except that the amount added under this paragraph shall not exceed the difference between the amount subtracted under section 43‑1022 in prior taxable years and the amount added under this section in any prior taxable years.

16. The amount of discharge of indebtedness income that is deferred and excluded from the computation of federal adjusted gross income in the current taxable year pursuant to section 108(i) of the internal revenue code as added by section 1231 of the American recovery and reinvestment act of 2009 (P.L. 111‑5).

17. The amount of any previously deferred original issue discount that was deducted in computing federal adjusted gross income in the current year pursuant to section 108(i) of the internal revenue code as added by section 1231 of the American recovery and reinvestment act of 2009 (P.L. 111‑5), to the extent that the amount was previously subtracted from Arizona gross income pursuant to section 43‑1022, paragraph 21.

18. If a subtraction is or has been taken by the taxpayer under section 43‑1024, in the current or a prior taxable year for the full amount of eligible access expenditures paid or incurred to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101‑336) or title 41, chapter 9, article 8, any amount of eligible access expenditures that is recognized under the internal revenue code, including any amount that is amortized according to federal amortization schedules, and that is included in computing taxable income for the current taxable year.

19. For taxable years beginning from and after December 31, 2017, the amount of any net capital loss 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.

20. Any expenses of elementary and secondary schoolteachers deducted pursuant to section 62(a)(2)(D) of the internal revenue code to the extent that a credit is claimed for the same expenses under section 43‑1075. END_STATUTE

Sec. 3. Title 43, chapter 10, article 5, Arizona Revised Statutes, is amended by adding section 43-1075, to read:

START_STATUTE43-1075. Schoolteachers; credit for educational supplies, materials, uniforms and clothing; definition

A. A credit is allowed against the taxes imposed by this title for expenses incurred by a qualified schoolteacher during the taxable year for educational supplies and materials that are purchased and used in the qualified schoolteacher's classroom and for uniforms and clothing that are used for educational purposes.

B. The amount of the credit under this section is the retail price the qualified schoolteacher pays during the taxable year for the educational supplies and materials, uniforms and clothing, but not more than $800. If both spouses filing a joint return are qualified schoolteachers and SEPARATELY incur expenses for educational supplies and materials, uniforms and clothing, they may include the expenses incurred by both spouses, but not more than $800 of separate expenses for each spouse.

C. If the allowable tax credit exceeds the taxes otherwise due under this title on the claimant's income for the taxable year, or if there are no taxes due, the taxpayer may carry the amount of the claim not used to offset taxes forward for not more than five consecutive taxable years.

D. The credit allowed under this section is in lieu of any deduction allowance for state tax purposes for the same expenses pursuant to section 62(a)(2)(D) of the internal revenue code.

E. For the purposes of this section, "qualified schoolteacher" means a teacher in a kindergarten program or in any of grades one through twelve. END_STATUTE

Sec. 4. Purpose

Pursuant to section 43‑223, Arizona Revised Statutes, the legislature enacts section 43‑1075, Arizona Revised Statutes, as added by this act, to reduce the financial burden on schoolteachers who personally purchase educational supplies and materials that are used in the teacher's classroom and uniforms and clothing that are used for educational purposes.

Sec. 5. Retroactivity

This act applies retroactively to taxable years beginning from and after December 31, 2019.