ARIZONA HOUSE OF REPRESENTATIVES Fifty-fifth Legislature First Regular Session
	Senate: FIN DPA 6-2-2-0 | 3rd Read 25-5-0-0

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SB 1142: SMI; employment; income tax credits

Sponsor:  Senator Barto, LD 15

Committee on Appropriations

Overview

Establishes the Credit for Employing Individuals with Serious Mental Illness, for individual and corporate income taxpayers beginning in the 2022 Taxable Year (TY).

History

Individual income tax is levied on Arizona residents’ taxable income and uses a graduated rate structure based on the taxpayer’s income level.  Corporate income tax is levied on corporations based on the corporation’s property, payroll and sales within Arizona.  Statute authorizes certain tax credits, which provide a reduction of a taxpayer’s individual or corporate income tax liability. A claimed tax credit reduces the taxpayer’s amount of income that is taxed (JLBC Tax Handbook, 2020).

Seriously mentally ill (SMI) is defined in statute as a person who, as a result of a severe and persistent mental disorder, exhibits emotional or behavioral function that is so impaired as to interfere substantially with their capacity to remain in the community without supportive treatment or services of a long-term or indefinite duration (A.R.S. § 36-550).

Statute requires any new individual or corporate income tax credit to include a specific year for the Joint Legislative Income Tax Credit Review Committee to review the credit (A.R.S. § 43-223).

Provisions

1. Creates, beginning in the 2022 TY, a tax credit for individual and corporate taxpayers who employ at least one individual with SMI. (Sec. 3, 5)

2. Establishes the amount of the tax credit at $2 for each hour worked during the calendar year by an employee with SMI. (Sec. 3, 5)

3. Caps the tax credit at $20,000 per taxpayer. (Sec. 3, 5)

4. Requires, to qualify for the credit:

a) That an employer not be a regional behavioral health authority or service provider that contracts with the Arizona health care cost containment system or a regional behavioral health authority;

b) Each employee — with respect to whom a credit is claimed — to reside in Arizona at the time of hiring and be SMI; and

c) That the employee — with respect to whom a credit is claimed — must not have been employed within the six months before the date of hire. (Sec. 3, 5)

5. Distributes credits on a first-come first-served basis. (Sec. 3, 5)

6. Establishes an aggregate total cap of $1,000,000 per calendar year for credits claimed by an individual. (Sec. 3)

7. Establishes an aggregate total cap of $1,000,000 per calendar year for credits claimed by a corporation. (Sec. 5)

8. Specifies that the tax credit is taken in lieu of any wage expense deductions taken for Arizona income tax purposes. (Sec. 3, 5)

9. Permits a taxpayer — if the credits exceed the amount of taxes due — to carry the excess credit amount forward for up to five consecutive years. (Sec. 3, 5)

10. Stipulates that co-owners of a business may each claim only the pro rata share of the credit based on ownership interest. (Sec. 3, 5)

11. Adds, to the calculation of Arizona adjusted gross income for individuals and Arizona taxable income for corporations, any wage expenses deducted pursuant to the Internal Revenue Code for which the credit is claimed.  (Sec. 2, 4)

12. Adds the SMI tax credit to the income tax credit review schedule.  (Sec. 1)

13. Permits the Department of Revenue to adopt necessary rules to administer the tax credit.  (Sec. 3, 5)

14. Contains a purpose statement.  (Sec. 6)

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                        SB 1142

Initials VP/NM Page 0 Appropriations

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