ARIZONA HOUSE OF REPRESENTATIVES

Fifty-fifth Legislature

Second Regular Session

Senate: FIN DPA 9-1-0-0 | 3rd Read 28-0-2-0

House: WM DP 9-0-1-0| 3rd Read 53-0-7-0

SB 1579: tax corrections act of 2022

Sponsor: Senator Livingston, LD 22

Transmitted to the Governor

Overview

Corrects errors and obsolete language, addresses blending problems and provides clarifying changes to the tax statutes.

History

The Department of Revenue (DOR) annually reviews the statutes related to taxation and makes recommendations to correct errors, remove obsolete language and address clarity. These recommendations are then compiled into an annual tax corrections bill.

Provisions

ADOR

1.   ☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal NoteIncludes a taxpayer's Arizona small business tax return in the tax information the DOR may disclose to a designee upon the taxpayer's written authorization. (Sec. 2)

2.   Allows confidential information to be shared with the department of agriculture for the purpose of confirming compliance with licensing provisions within statute. (Sec. 2)

Tax Credits

3.   Repeals the following income tax credits:

      a)   Credit for Employment by a Healthy Forest Enterprise (individual income tax);

      b)   Credit for Pollution Control Equipment (individual income tax); and

      c)   Credit for Construction Costs of Qualified Environmental Technology Facility.  (Sec. 14)

4.   Removes the repealed income tax credits from the income tax credit review schedule.  (Sec. 18)

Income Tax

5.   Establishes that an individual who elects to file an Arizona small business income tax return may not include the correctly made additions or subtractions on the small business income tax return on their personal income tax return as well. (Sec. 12)

6.   Establishes that for the purpose of determining a taxpayers adjusted gross income for the Family Income Tax Credit, the amount subtracted from a taxpayer's Arizona small business gross income is added back to the taxpayer's Arizona gross income.  (Sec. 13)

7.   Changes the date when DOR must adjust the dollar amounts for each rate bracket for the tax imposed on estates and trusts retroactively from January 1, 2021, to January 1, 2022. (Sec. 20)

 

 

Entity Level Income Tax

8.   Specifies that the taxable income for an S corporation that has elected to pay entity-level income tax is comprised of the total of all distributive income passed through to shareholders.  (Sec. 9)

9.   States that entity-level income tax election is applicable to partners or shareholders who are individuals, estates or trusts that waive their right to opt out of the election.  (Sec. 9)

10.  Creates a credit for entity-level income tax, allowed against corporate income tax for a taxpayer who is in a partnership or shareholder of an S corporation who elects to pay the entity-level income tax.  (Sec. 21)

11.  Establishes that the amount of the credit for entity-level income tax is the portion of the tax paid by the partnership or S corporation that is attributable to the partner's or shareholder's share of Arizona taxable income. (Sec. 21)

12.  Requires that the estate or trust and it's noncorporate beneficiaries must distribute the credit for entity-level income tax in the same proportion as their respective shares of the federal distributable net income of the estate or trust from the partnership or S corporation.  (Sec. 21)

13.  Prohibits the amount of the claim not used to offset income taxes from being carried forward for more that five consecutive taxable years. (Sec. 21)

Miscellaneous

14.  Specifies that an electronic transmission or distribution system or an energy storage system shall be centrally valued by DOR.  (Sec. 6)

15.  States that prize winnings paid by a fantasy sport contest operator and an event wagering operator are subject to federal withholding and are to be treated as payments of wages from an employer to an employee for a payroll period.  (Sec. 8)

16.  Prohibits partners in a partnership that is not a corporation from claiming a share of the Credit for Pollution Control Equipment.  (Sec. 19)

17.  States that the repeal of a tax credit does not affect the validity or value of the repealed credit that is carried forward from previous taxable years for application against tax liabilities in subsequent taxable years. (Sec. 24)

18.  Contains a retroactivity clause. (Sec. 23)

19.  Contains technical and conforming changes. (Sec. 1, 2, 3, 4, 5, 6, 7, 10, 11, 14, 15, 16, 17, 18, 19)

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22.  ---------- DOCUMENT FOOTER ---------

23.                    SB 1579

24.  Initials VP/ES        Page 0 Transmitted

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26.  ---------- DOCUMENT FOOTER ---------