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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
AMENDED
nonresident real estate sales; notice
Purpose
Modifies reporting requirements for the Arizona Department of Revenue (ADOR) relating to capital gains tax paid on and revenue collected from nonresident real estate sales in Arizona.
Background
Statute requires a licensed escrow agent to file an information return with ADOR using the same form and format of the return filed with the U.S. Internal Revenue Service (IRS) by March 31 on sales closed in the preceding calendar year. An information return must be prepared by every person doing business as a broker to report the sale of real estate. The return must list the name and address of each customer and contain details regarding gross proceeds. By June 30 of each year, ADOR must estimate and report to the Joint Legislative Budget Committee (JLBC) and the Governor's Office of Strategic Planning and Budgeting (OSPB) on the amount of revenue collected from the sale of real estate by nonresidents that is attributed to the information return in the prior tax year (A.R.S. § 43-312; I.R.C. § 6045(e)).
In 2019, the Legislature required ADOR to report to JLBC and OSPB by June 30, 2020, on the estimated amount of capital gains tax paid by nonresidents on real estate transactions for the year prior to TY 2019 based on available data from the IRS (A.R.S. § 43-312).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Requires ADOR, by June 30 of each year, to report to JLBC and OSPB on the estimated amount of capital gains tax paid by nonresidents on real estate transactions in Arizona for the previous tax year based on available data from the IRS.
2. Requires ADOR to collaborate with stakeholders to develop recommendations to:
a) ensure taxpayer compliance with nonresident real estate sale reporting requirements; and
b) identify best practices to enforce and collect tax from nonresidents on income generated from capital gains that is allocable to the state.
3. Requires ADOR, by June 30, 2027, to submit and include the outlined recommendations in the annual report on the estimated amount of capital gains tax paid by nonresidents on real estate transactions in Arizona from the previous tax year.
4. Adds the President of the Senate and Speaker of the House of Representatives as recipients of ADOR's report on the amount of revenue collected from the sale of real estate by nonresidents that is attributed to the information return in the prior tax year.
5. Repeals the outlined recommendation and reporting.
6. Makes technical and conforming changes.
7. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Removes the requirement for ADOR to annually notify JLBC and OSPB when the amount of revenue collected from real estate sales by nonresidents in Arizona for the prior fiscal year reaches $3,000,000.
2. Makes ADOR's report on capital gains tax paid by nonresidents on real estate transactions in Arizona for the previous tax year an annual report, rather than a onetime report due on June 30, 2027.
Amendments Adopted by Committee of the Whole
1. Requires ADOR to develop outlined recommendations relating to nonresident real estate sales and include the outlined recommendations in the annual report on the estimated amount of capital gains tax paid by nonresidents on real estate transactions in Arizona.
2. Repeals the recommendation and reporting requirement on January 1, 2028.
Senate Action
FIN 1/27/25 DPA 4-3-0
Prepared by Senate Research
February 13, 2025
MG/AL/ci