 |
ARIZONA STATE SENATE
Fifty-Fifth Legislature, First Regular Session
foster youth employment; tax credit
Purpose
Establishes the Credit for Employing Foster Youth, allowed against individual and corporate income tax liability beginning in Taxable Year (TY) 2022 and outlines requirements for the credit.
Background
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).
Statute requires any new individual or corporate income tax credit to include a specific year for the Joint Legislative Income Tax Credit Review Committee (JLITCRC) to review the credit (A.R.S. § 43-223).
If the creation of the Credit for Employing Foster Youth results in claims against income tax liability, there may be a fiscal impact to the state General Fund.
Provisions
1. Allows a credit against individual and corporate income tax, beginning in TY 2022, for employing a qualified foster youth.
2. Defines qualified foster youth as an individual who works a minimum of 20 hours per week and was not previously employed by the taxpayer before the TY for which the credit is claimed and who either:
a) is currently in the legal custody of DCS, an Indian tribe in Arizona or the U.S. Department of the Interior, Bureau of Indian Affairs, Division of Human Services; or
b) was at least 14 years of age and in the legal custody within the seven years before the TY for which the credit is claimed.
3. Sets the credit amount at up to $1,000 of the gross wages paid to each qualified foster youth during the TY for which the return is filed, not to exceed $5,000 per taxpayer.
4. Stipulates that a taxpayer who employs a qualified foster youth for less than the full TY is eligible for a credit amount equal to $1,000 multiplied by the fraction of a full year for which the qualified foster youth was employed.
5. Sets an aggregate total cap of $1,000,000 for credits claimed by individuals and corporations.
6. Allows spouses who file separate returns for a TY in which they could have filed a joint return to each claim one-half of the credit that would have been allowed on a joint return.
7. Allows a taxpayer to claim the credit for each TY in which the taxpayer employs a qualified foster youth and prohibits a taxpayer from claiming the credit for:
a) more than one calendar year from the qualified foster youth's date of hire; or
b) a qualified foster youth for whom a different taxpayer has already claimed the credit.
8. Requires the taxpayer to submit to ADOR information for each employed qualified foster youth during the TY for which the credit is claimed, including information that:
a) establishes the employee is a qualified foster youth; and
b) determines the employee was not also employed in the same TY by another taxpayer claiming the credit.
9. Stipulates that the credit is in lieu of any wage expense deduction taken for state income tax purposes.
10. Allows the taxpayer, if the allowable credit exceeds the taxes otherwise due or if there are no taxes due, to carry the amount of the claim not used to offset the taxes forward for no more than five consecutive TYs' income tax liability.
11. Allows co-owners of a business to each claim only the pro rata share of the credit based on ownership interest and prohibits the total of the credits allowed to the co-owners from exceeding the amount that would have been allowed a sole owner.
12. Adds, to the computation 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.
13. Requires JLITCRC to review the credit in years ending in 1 and 6.
14. Applies the credit to TYs beginning January 1, 2022.
15. Distributes credits on a first-come, first-served basis.
16. Requires ADOR to:
a) adopt rules and prescribe forms and procedures to administer the credit; and
b) collaborate to implement the credit with the Department of Child Safety (DCS), Indian tribes in Arizona and the U.S. Department of the Interior, Bureau of Indian Affairs, Division of Human Services.
17. Contains a purpose statement.
18. Makes conforming changes.
19. Becomes effective on the general effective date.
Prepared by Senate Research
January 25, 2021
MG/ML/gs