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ARIZONA STATE SENATE
Fifty-Fifth Legislature, First Regular Session
REVISED
internal revenue code; conformity.
Purpose
Conforms Arizona tax statutes to the United States Internal Revenue Code (U.S. IRC) as of January 1, 2021, to reflect changes adopted by the U.S. Congress during 2020.
Background
The Arizona Legislature periodically updates the statutory definition of the U.S. 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 U.S. IRC. Tax conformity with the U.S. 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.
According to the Arizona Department of Revenue, the fiscal impact to the state General Fund (state GF) associated with the annual Consolidated Appropriations Act, 2021 (CAA) is estimated at $(3.2) million in FY 2021, $(17.6) million in FY 2022 and $(7.1) million in FY 2023. Additionally, the fiscal impact to the state GF associated with the Coronavirus Aid, Relief and Economic Security Act (CARES Act) is estimated at $(301.2) million in FY 2021, $(197.3) million in FY 2022 and $(0.5) million in FY 2023. The Joint Legislative Budget Committee fiscal note estimates that conforming to the CARES Act and the CAA would reduce state GF income tax collections by $(594.8) million over the next several years (JLBC fiscal note).
Provisions
1. Updates the statutory definition of Internal Revenue Code to include all provisions in effect as of January 1, 2021.
2. Makes technical and conforming changes.
3. Becomes effective on the general effective date.
Revisions
· Updates the fiscal impact statement.
Senate Action
FIN 2/17/21 DP 10-0-0
Prepared by Senate Research
February 24, 2021
MG/gs