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ARIZONA STATE SENATE
Fifty-Fifth Legislature, First Regular Session
income tax; subtraction; FDIC premiums
Purpose
Requires, retroactive to taxable years beginning January 1, 2020, the amount of any Federal Deposit Insurance Corporation (FDIC) premiums paid or incurred by a taxpayer that is disallowed as a deduction for federal income tax purposes to be subtracted when computing a corporation's Arizona gross income.
Background
Arizona gross income for a corporation is the same as the corporation's federal taxable income for the taxable year. Current statute authorizes various amounts to be added or subtracted when computing a corporation's Arizona taxable income (A.R.S. §§ 43-1101; 43-1121; and 43-1122).
The Internal Revenue Code disallows a deduction for the applicable percentage of any FDIC premium paid or incurred by certain large financial institutions, unless the total consolidated assets of the taxpayer are less than $10 billion (26 U.S.C. § 162). Prior to 2017, federal law considered FDIC premiums as ordinary and necessary expenses and therefore deductible. In 2017, the Tax Cuts and Jobs Act limited the deduction of FDIC premiums based on the consolidated assets of a financial institution (P.L. 115-97 § 13531).
If an eligible corporation subtracts the amount of FDIC premiums that are disallowed as a deduction for federal income tax purposes from the computation of the corporation's Arizona taxable income, there may be a fiscal impact to the state General Fund.
Provisions
1. Requires, when computing Arizona taxable income for a corporation, the amount of any FDIC premiums paid or incurred by a corporate taxpayer that is disallowed as a deduction for federal income tax purposes to be subtracted from Arizona gross income.
2. Becomes effective on the general effective date, retroactive to taxable years beginning January 1, 2020.
Prepared by Senate Research
February 8, 2021
MG/gs