ARIZONA HOUSE OF REPRESENTATIVES Fifty-seventh Legislature First Regular Session
	Senate: FIN 4-3-0-0 | 3rd Read 17-8-5-0

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SB 1371: income tax; subtraction; retirement distribution

Sponsor: Senator Mesnard, LD 13

Committee on Ways & Means

Overview

Creates an individual income tax subtraction from Arizona gross income for the amount of any distributions from a retirement account for taxpayers 67 or older and limits the subtraction to the amount of the standard deduction.

History

Individual income tax is levied on Arizona residents’ taxable income and, beginning in Tax Year 2023, the state imposes a 2.5% tax rate. The tax is levied, paid and collected each year based on taxable income. The tax base starts with Arizona gross income, which is equivalent to the federal adjusted gross income and is then modified by a list of additions and subtractions to income. This is further reduced by exemptions and standard or itemized deductions to arrive at Arizona taxable income. (A.R.S. §§ 43-1011; 43-1021; 43-1022; 43-1023; 43-1041; and 43-1042)

Federal law defines several types of pension and retirement accounts in the U.S. Internal Revenue Code (IRC), including: 1) a trust created or organized in the United States and forms part of pension constitutes a qualified trust; 2) a tax-sheltered annuity offered by public schools and certain tax-exempt organizations; 3) a deferred compensation plan; 4) an individual retirement account (IRA); 5) a Roth IRA: 6) a simplified employee pension; and 7) a simple retirement account. (I.R.C. §§ 401; 403; 457; 408; 408(a); 408(k) and 408(p))

Provisions

1. Creates an individual income tax subtraction, to the extent not already excluded from Arizona gross income, for the amount of any distributions from a retirement account for taxpayers 67 or older. (Sec. 1)

2. Limits the subtraction to the amount of the standard deduction. (Sec. 1)

3. Defines retirement account. (Sec. 1)

4. Applies the subtraction to taxable years beginning January 1, 2025. (Sec. 2)

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8.                   SB 1371

9. Initials VP           Page 0 Ways & Means

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