Bill Text: AZ HB2664 | 2014 | Fifty-first Legislature 2nd Regular | Engrossed
Bill Title: Income tax revisions
Spectrum: Partisan Bill (Republican 2-0)
Status: (Vetoed) 2014-04-30 - Governor Vetoed [HB2664 Detail]
Download: Arizona-2014-HB2664-Engrossed.html
Senate Engrossed House Bill |
State of Arizona House of Representatives Fifty-first Legislature Second Regular Session 2014
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HOUSE BILL 2664 |
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AN ACT
AMENDING SECTIONS 43‑1021, 43‑1022, 43‑1029, 43‑1121, 43‑1122 AND 43‑1127, Arizona Revised Statutes; RELATING TO INCOME TAX.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 43-1021, Arizona Revised Statutes, is amended to read:
43-1021. Additions to Arizona gross income
In computing Arizona adjusted gross income, the following amounts shall be added to Arizona gross income:
1. A beneficiary's share of the fiduciary adjustment to the extent that the amount determined by section 43‑1333 increases the beneficiary's Arizona gross income.
2. An amount equal to the ordinary income portion of a lump sum distribution that was excluded from federal adjusted gross income pursuant to section 402(d) of the internal revenue code.
3. The amount of interest income received on obligations of any state, territory or possession of the United States, or any political subdivision thereof, located outside the state of Arizona, reduced, for tax years beginning from and after December 31, 1996, by the amount of any interest on indebtedness and other related expenses that were incurred or continued to purchase or carry those obligations and that are not otherwise deducted or subtracted in arriving at Arizona gross income.
4. Annuity income received during the taxable year to the extent that the sum of the proceeds received from such annuity in all taxable years prior to and including the current taxable year exceeds the total consideration and premiums paid by the taxpayer. This paragraph applies only to those annuities with respect to which the first payment was received prior to December 31, 1978.
5. 4. The excess of a partner's share of partnership taxable income required to be included under chapter 14, article 2 of this title over the income required to be reported under section 702(a)(8) of the internal revenue code.
6. 5. The excess of a partner's share of partnership losses determined pursuant to section 702(a)(8) of the internal revenue code over the losses allowable under chapter 14, article 2 of this title.
7. 6. The amount by which the adjusted basis of property described in this paragraph and computed pursuant to the internal revenue code exceeds the adjusted basis of such property computed pursuant to this title and the income tax act of 1954, as amended. This paragraph shall apply to all property that is held for the production of income and that is sold or otherwise disposed of during the taxable year, except depreciable property used in a trade or business.
8. 7. The amount of depreciation or amortization of costs of any capital investment that is deducted pursuant to section 167 or 179 of the internal revenue code by a qualified defense contractor with respect to which an election is made to amortize pursuant to section 43‑1024.
9. 8. The amount of gain from the sale or other disposition of a capital investment that a qualified defense contractor has elected to amortize pursuant to section 43‑1024.
10. 9. Amounts withdrawn from the Arizona state retirement system, the corrections officer retirement plan, the public safety personnel retirement system, the elected officials' retirement plan or a county or city retirement plan by an employee on termination of employment before retirement to the extent they were deducted in arriving at Arizona taxable income in any year.
11. 10. That portion of the net operating loss included in federal adjusted gross income that has already been taken as a net operating loss for Arizona purposes or that is separately taken as a subtraction under the special net operating loss transition rule.
12. 11. Any nonitemized amount deducted pursuant to section 170 of the internal revenue code representing contributions to an educational institution that denies admission, enrollment or board and room accommodations on the basis of race, color or ethnic background except those institutions primarily established for the education of American Indians.
13. 12. Amounts withdrawn from a medical savings account by the individual during the taxable year computed pursuant to section 220(f) of the internal revenue code and not included in federal adjusted gross income.
14. 13. Any amount of agricultural water conservation expenses that were deducted pursuant to the internal revenue code for which a credit is claimed under section 43‑1084.
15. 14. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under section 43‑1080 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.
16. 15. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43‑1080 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43‑1080.
17. 16. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under either section 43‑1081 or 43‑1081.01 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.
18. 17. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43‑1074.02, 43‑1081 or 43‑1081.01 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43‑1074.02, 43‑1081 or 43‑1081.01, as applicable.
19. 18. The deduction referred to in section 1341(a)(4) of the internal revenue code for restoration of a substantial amount held under a claim of right.
20. 19. The amount by which a net operating loss carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds the net operating loss carryover or capital loss carryover allowable pursuant to section 43‑1029, subsection F.
21. 20. Any amount deducted pursuant to section 170 of the internal revenue code representing contributions to a school tuition organization or a public school for which a credit is claimed under section 43‑1089, 43‑1089.01 or 43‑1089.03.
22. 21. Any amount deducted in computing Arizona gross income as expenses for installing solar stub outs or electric vehicle recharge outlets in this state with respect to which a credit is claimed pursuant to section 43‑1090.
23. 22. Any wage expenses deducted pursuant to the internal revenue code for which a credit is claimed under section 43‑1087 and representing net increases in qualified employment positions for employment of temporary assistance for needy families recipients.
24. 23. Any amount deducted for conveying ownership or development rights of property to an agricultural preservation district under section 48‑5702 for which a credit is claimed under section 43‑1081.02.
25. 24. The amount of any depreciation allowance allowed pursuant to section 167(a) of the internal revenue code to the extent not previously added.
26. 25. With respect to property for which an expense deduction was taken pursuant to section 179 of the internal revenue code in a taxable year beginning before January 1, 2013, the amount in excess of twenty‑five thousand dollars.
27. 26. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under section 43‑1090.01 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.
28. 27. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43‑1090.01 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43‑1090.01.
29. 28. The amount of a nonqualified withdrawal, as defined in section 15‑1871, from a college savings plan established pursuant to section 529 of the internal revenue code that is made to a distributee to the extent the amount is not included in computing federal adjusted gross income, except that the amount added under this paragraph shall not exceed the difference between the amount subtracted under section 43‑1022 in prior taxable years and the amount added under this section in any prior taxable years.
30. 29. The amount of unemployment compensation that is excluded from federal adjusted gross income pursuant to section 85(c) of the internal revenue code as added by section 1007 of the American recovery and reinvestment act of 2009 (P.L. 111-5).
31. 30. The amount of discharge of indebtedness income that is deferred and excluded from the computation of federal adjusted gross income or federal taxable income in the current taxable year pursuant to section 108(i) of the internal revenue code as added by section 1231 of the American recovery and reinvestment act of 2009 (P.L. 111-5).
32. 31. The amount of any previously deferred original issue discount that was deducted in computing federal adjusted gross income or federal taxable income in the current year pursuant to section 108(i) of the internal revenue code as added by section 1231 of the American recovery and reinvestment act of 2009 (P.L. 111-5), to the extent that the amount was previously subtracted from Arizona gross income pursuant to section 43‑1022, paragraph 31 29.
33. 32. For taxable years beginning from and after December 31, 2011 through December 31, 2014, the amount of any deduction that is claimed in computing federal adjusted gross income for health insurance premiums or contributions to a health savings account for which a credit is claimed under section 43‑1087.01 or 43‑1185.
33. With respect to property for which an adjustment is made under section 43‑1022, paragraph 36, one‑fifth of the amount of the adjustment under section 43‑1022, paragraph 36 for the year in which the adjustment is made and in each of the following four years. If the property is sold or otherwise disposed of during the taxable year, the taxpayer shall make the adjustment required under paragraph 34 of this section in lieu of the adjustment under this paragraph related to the property.
34. For property for which an adjustment was made under section 43‑1022, paragraph 36 and that is sold or otherwise disposed of during the taxable year, the amount by which the adjusted basis computed under the internal revenue code with respect to property exceeds the adjusted basis of the property computed under this title.
Sec. 2. Section 43-1022, Arizona Revised Statutes, is amended to read:
43-1022. Subtractions from Arizona gross income
In computing Arizona adjusted gross income, the following amounts shall be subtracted from Arizona gross income:
1. The amount of exemptions allowed by section 43‑1023.
2. Benefits, annuities and pensions in an amount totaling not more than two thousand five hundred dollars received from one or more of the following:
(a) The United States government service retirement and disability fund, retired or retainer pay of the uniformed services of the United States, the United States foreign service retirement and disability system and any other retirement system or plan established by federal law.
(b) The Arizona state retirement system, the corrections officer retirement plan, the public safety personnel retirement system, the elected officials' retirement plan, an optional retirement program established by the Arizona board of regents under section 15‑1628, an optional retirement program established by a community college district board under section 15‑1451 or a retirement plan established for employees of a county, city or town in this state.
3. A beneficiary's share of the fiduciary adjustment to the extent that the amount determined by section 43‑1333 decreases the beneficiary's Arizona gross income.
4. The amount of any distributions from an individual retirement account as provided for in section 408 of the internal revenue code or from a qualified retirement plan of a self‑employed individual as provided for in section 401 of the internal revenue code to the extent that total adjustments made pursuant to this paragraph in all tax years do not exceed the total of all contributions made by the taxpayer to such plans before December 31, 1975, which were included in computing Arizona taxable income.
5. 4. The amount of income on an installment receivable that is recognized pursuant to the internal revenue code and that has already been recognized on the death of the taxpayer for purposes of this title for tax years ending before January 1, 1990.
6. 5. Interest income received on obligations of the United States, less any interest on indebtedness, or other related expenses, and deducted in arriving at Arizona gross income, which were incurred or continued to purchase or carry such obligations.
7. 6. The amount of any income tax refunds that were received from states other than Arizona and that were included as income in computing federal adjusted gross income.
8. Annuity income included in federal adjusted gross income pursuant to section 72 of the internal revenue code if the first payment with respect to such annuity was received before December 31, 1978.
9. 7. The excess of a partner's share of income required to be included under section 702(a)(8) of the internal revenue code over the income required to be included under chapter 14, article 2 of this title.
10. 8. The excess of a partner's share of partnership losses determined pursuant to chapter 14, article 2 of this title over the losses allowable under section 702(a)(8) of the internal revenue code.
11. 9. The amount by which the adjusted basis of property described in this paragraph and computed pursuant to this title and the income tax act of 1954, as amended, exceeds the adjusted basis of such property computed pursuant to the internal revenue code. This paragraph shall apply to all property that is held for the production of income and that is sold or otherwise disposed of during the taxable year other than depreciable property used in a trade or business.
12. 10. The amount allowed by section 43‑1024 for amortization, by a qualified defense contractor certified by the Arizona commerce authority under section 41‑1508, of a capital investment for private commercial activities.
13. 11. The amount of gain included in federal adjusted gross income on the sale or other disposition of a capital investment that a qualified defense contractor has elected to amortize pursuant to section 43‑1024.
14. 12. The amount allowed by section 43‑1025 for contributions during the taxable year of agricultural crops to charitable organizations.
15. 13. The portion of any wages or salaries paid or incurred by the taxpayer for the taxable year that is equal to the amount of the federal work opportunity credit, the empowerment zone employment credit, the credit for employer paid social security taxes on employee cash tips and the Indian employment credit that the taxpayer received under sections 45A, 45B, 51(a) and 1396 of the internal revenue code.
16. 14. The amount of prizes or winnings less than five thousand dollars in a single taxable year from any of the state lotteries established and operated pursuant to title 5, chapter 5.1, article 1, except that all such winnings before March 22, 1983, including periodic distributions from such winnings made after March 22, 1983, may be subtracted.
17. 15. The amount of exploration expenses that is determined pursuant to section 617 of the internal revenue code, that has been deferred in a taxable year ending before January 1, 1990 and for which a subtraction has not previously been made. The subtraction shall be made on a ratable basis as the units of produced ores or minerals discovered or explored as a result of this exploration are sold.
18. 16. The amount included in federal adjusted gross income pursuant to section 86 of the internal revenue code, relating to taxation of social security and railroad retirement benefits.
19. 17. To the extent not already excluded from Arizona gross income under the internal revenue code, compensation received for active service as a member of the reserves, the national guard or the armed forces of the United States, including compensation for service in a combat zone as determined under section 112 of the internal revenue code.
20. 18. The amount of unreimbursed medical and hospital costs, adoption counseling, legal and agency fees and other nonrecurring costs of adoption not to exceed three thousand dollars. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife shall not exceed three thousand dollars. The subtraction under this paragraph may be taken for the costs that are described in this paragraph and that are incurred in prior years, but the subtraction may be taken only in the year during which the final adoption order is granted.
21. 19. The amount authorized by section 43‑1027 for the taxable year relating to qualified wood stoves, wood fireplaces or gas fired fireplaces.
22. 20. With respect to a medical savings account established pursuant to section 43‑1028:
(a) An eligible individual may subtract:
(i) The amount of contributions made by the individual's employer during the taxable year to the individual's medical savings account pursuant to section 43‑1028 to the extent that the employer contributions are included in the individual's federal adjusted gross income.
(ii) The amount deposited by the individual in the account during the taxable year to the extent that the individual's contributions are included in the individual's federal adjusted gross income.
(b) The individual's employer may subtract the amount of contributions made by the employer to a medical savings account established on the individual's behalf to the extent that the contributions are not deductible under the internal revenue code.
23. 21. The amount by which a net operating loss carryover or capital loss carryover allowable pursuant to section 43‑1029, subsection F exceeds the net operating loss carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code.
24. 22. Any amount of qualified educational expenses that is distributed from a qualified state tuition program determined pursuant to section 529 of the internal revenue code and that is included in income in computing federal adjusted gross income.
25. 23. Any item of income resulting from an installment sale that has been properly subjected to income tax in another state in a previous taxable year and that is included in Arizona gross income in the current taxable year.
26. 24. The amount authorized by section 43‑1030 relating to holocaust survivors.
27. 25. For property placed in service:
(a) In taxable years beginning before December 31, 2012, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year computed as if the election described in section 168(k)(2)(D)(iii) of the internal revenue code had been made for each applicable class of property in the year the property was placed in service.
(b) In taxable years beginning from and after December 31, 2012 through December 31, 2013, an amount determined in the year the asset was placed in service based on the calculation in subdivision (a) of this paragraph. In the first taxable year beginning from and after December 31, 2013 the taxpayer may elect to subtract the amount necessary to make the depreciation claimed to date for the purposes of this title the same as it would have been if subdivision (c) of this paragraph had applied for the entire time the asset was in service. Subdivision (c) of this paragraph applies for the remainder of the asset's life. If the taxpayer does not make the election under this subdivision, subdivision (a) of this paragraph applies for the remainder of the asset's life.
(c) In taxable years
beginning from and after December 31, 2013, an amount equal to the depreciation
allowable pursuant to section 167(a) of the internal revenue code for the
taxable year as computed as if the additional allowance for depreciation had
been ten per cent of the amount allowed pursuant to section 168(k) of the
internal revenue code.
28. 26. With respect to property that is sold or otherwise disposed of during the taxable year by a taxpayer that complied with section 43‑1021, paragraph 25 24 with respect to that property, the amount of depreciation that has been allowed pursuant to section 167(a) of the internal revenue code to the extent that the amount has not already reduced Arizona taxable income in the current or prior taxable years.
29. 27. With respect to property for which an adjustment was made under section 43‑1021, paragraph 26 25, an amount equal to one‑fifth of the amount of the adjustment pursuant to section 43‑1021, paragraph 26 25 in the year in which the amount was adjusted under section 43‑1021, paragraph 26 25 and in each of the following four years.
30. 28. The amount contributed during the taxable year to college savings plans established pursuant to section 529 of the internal revenue code to the extent that the contributions were not deducted in computing federal adjusted gross income. The amount subtracted shall not exceed:
(a) Two thousand dollars for a single individual or a head of household.
(b) Four thousand dollars for a married couple filing a joint return. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife shall not exceed four thousand dollars.
31. 29. The amount of any original issue discount that was deferred and not allowed to be deducted in computing federal adjusted gross income or federal taxable income in the current taxable year pursuant to section 108(i) of the internal revenue code as added by section 1231 of the American recovery and reinvestment act of 2009 (P.L. 111‑5).
32. 30. The amount of previously deferred discharge of indebtedness income that is included in the computation of federal adjusted gross income or federal taxable income in the current taxable year pursuant to section 108(i) of the internal revenue code as added by section 1231 of the American recovery and reinvestment act of 2009 (P.L. 111-5), to the extent that the amount was previously added to Arizona gross income pursuant to section 43‑1021, paragraph 31 30.
33. 31. The portion of the net operating loss carryforward that would have been allowed as a deduction in the current year pursuant to section 172 of the internal revenue code if the election described in section 172(b)(1)(H) of the internal revenue code had not been made in the year of the loss that exceeds the actual net operating loss carryforward that was deducted in arriving at federal adjusted gross income. This subtraction only applies to taxpayers who made an election under section 172(b)(1)(H) of the internal revenue code as amended by section 1211 of the American recovery and reinvestment act of 2009 (P.L. 111‑5) or as amended by section 13 of the worker, homeownership, and business assistance act of 2009 (P.L. 111‑92).
34. 32. For taxable years beginning from and after December 31, 2013, the amount of any net capital gain included in federal adjusted gross income for the taxable year derived from investment in a qualified small business as determined by the Arizona commerce authority pursuant to section 41‑1518.
35. 33. At the taxpayer's election an amount of any net long-term capital gain included in federal adjusted gross income for the taxable year that is derived from an investment in an asset acquired after December 31, 2011, as follows:
(a) For taxable years beginning from and after December 31, 2012 through December 31, 2013, ten per cent of the net long-term capital gain included in federal adjusted gross income.
(b) For taxable years beginning from and after December 31, 2013 through December 31, 2014, twenty per cent of the net long-term capital gain included in federal adjusted gross income.
(c) For taxable years beginning from and after December 31, 2014, twenty-five per cent of the net long-term capital gain included in federal adjusted gross income.
For the purposes of this paragraph, a transferee that receives an asset by gift or at the death of a transferor is considered to have acquired the asset when the asset was acquired by the transferor. If the date an asset is acquired cannot be verified, a subtraction under this paragraph is not allowed. An election under this paragraph may be made by claiming the subtraction on the taxpayer's return.
36. 34. If an individual is not claiming itemized deductions pursuant to section 43‑1042, the amount of premium costs for long-term care insurance, as defined in section 20‑1691.
37. 35. With respect to a long-term health care savings account established pursuant to section 43‑1032, the amount deposited by the taxpayer in the account during the taxable year to the extent that the taxpayer's contributions are included in the taxpayer's federal adjusted gross income.
36. For property placed in service in taxable years beginning from and after December 31, 2013, at the taxpayer's election the difference between the expense amount allowed pursuant to section 179 of the internal revenue code in determining the taxpayer's federal adjusted gross income and an amount not to exceed the expense deduction that would be allowed pursuant to section 179 of the internal revenue code if the maximum deduction allowed were five hundred thousand dollars and this limitation were reduced by the amount that the cost of section 179 property placed in service in the taxable year exceeds two million dollars.
Sec. 3. Section 43-1029, Arizona Revised Statutes, is amended to read:
43-1029. Restoration of a substantial amount held under claim of right; computation of tax
A. This section applies if:
1. An item of income was included in gross income for a prior taxable year or years because it appeared that the taxpayer had an unrestricted right to the item.
2. A deduction would be allowable under the internal revenue code or this title for the taxable year, without application of section 1341(b)(3) of the internal revenue code or section 43‑1021, paragraph 19 18, because after the close of the prior taxable year or years it was established that the taxpayer did not have an unrestricted right to all or part of the item.
3. The amount of the deduction exceeds three thousand dollars.
B. If all of the conditions in subsection A of this section apply, the tax imposed by this chapter for the taxable year is an amount equal to the tax for the taxable year computed without the deduction, minus the decrease in tax under this chapter for the prior taxable year or years that would result solely from excluding the item or portion of the item from gross income for the prior taxable year or years.
C. If the decrease in tax exceeds the tax imposed by this chapter for the taxable year, computed without the deduction, the excess is considered to be a payment of tax on the last day prescribed by law for the payment of tax for the taxable year and shall be refunded or credited in the same manner as if it were an overpayment for the taxable year.
D. Subsection B of this section does not apply to any deduction that is allowable with respect to an item that was included in gross income by reason of the sale or other disposition of stock in trade of the taxpayer, or other property of a kind that would properly have been included in the inventory of the taxpayer on hand at the close of the prior taxable year, or property that is held by the taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or business. This subsection does not apply if the deduction arises out of refunds or repayments with respect to rates made by a regulated public utility that is listed in section 7701(a)(33)(A) through (H) of the internal revenue code, if the refunds or repayments are:
1. Required to be made by the government, political subdivision, agency or instrumentality referred to in that section.
2. Required to be made by an order of a court.
3. Made in settlement of litigation or under threat or imminence of litigation.
E. If the exclusion under subsection B of this section results in:
1. A net operating loss for the prior taxable year or years for purposes of computing the decrease in tax for the prior year or years under subsection B of this section:
(a) The loss shall be:
(i) Carried over under this chapter to the same extent and in the same manner as was provided under prior law for taxable years beginning on or before December 31, 1989.
(ii) Carried back and carried over to the same extent and in the same manner as provided under section 172 of the internal revenue code for taxable years beginning from and after December 31, 1989.
(b) No carryover beyond the taxable year may be taken into account.
2. A capital loss for the prior taxable year or years, for purposes of computing the decrease in tax for the prior taxable year or years under subsection B of this section:
(a) The loss shall be carried back and carried over to the same extent and in the same manner as is provided under section 1212 of the internal revenue code.
(b) No carryover beyond the taxable year may be taken into account.
F. In computing Arizona taxable income for taxable years subsequent to the current taxable year, the net operating loss or capital loss determined in subsection E of this section shall be taken into account to the same extent and in the same manner as a net operating loss or capital loss sustained for prior taxable years.
Sec. 4. Section 43-1121, Arizona Revised Statutes, is amended to read:
43-1121. Additions to Arizona gross income; corporations
In computing Arizona taxable income for a corporation, the following amounts shall be added to Arizona gross income:
1. The amounts computed pursuant to section 43‑1021, paragraphs 3 through 9, 12, 25, 26, 31, 32 and 33 8, 11, 24, 25 and 30 through 32.
2. The amount of dividend income received from corporations and allowed as a deduction pursuant to sections 243, 244 and 245 of the internal revenue code.
3. Taxes which are based on income paid to states, local governments or foreign governments and which were deducted in computing federal taxable income.
4. Expenses and interest relating to tax‑exempt income on indebtedness incurred or continued to purchase or carry obligations the interest on which is wholly exempt from the tax imposed by this title. Financial institutions, as defined in section 6‑101, shall be governed by section 43‑961, paragraph 2.
5. Commissions, rentals and other amounts paid or accrued to a domestic international sales corporation controlled by the payor corporation if the domestic international sales corporation is not required to report its taxable income to this state because its income is not derived from or attributable to sources within this state. If the domestic international sales corporation is subject to article 4 of this chapter, the department shall prescribe by rule the method of determining the portion of the commissions, rentals and other amounts which are paid or accrued to the controlled domestic international sales corporation and which shall be deducted by the payor. For the purposes of this paragraph, "control" means direct or indirect ownership or control of fifty per cent or more of the voting stock of the domestic international sales corporation by the payor corporation.
6. Federal income tax refunds received during the taxable year to the extent they were deducted in arriving at Arizona taxable income in a previous year.
7. The amount of net operating loss taken pursuant to section 172 of the internal revenue code.
8. The amount of exploration expenses determined pursuant to section 617 of the internal revenue code to the extent that they exceed seventy‑five thousand dollars and to the extent that the election is made to defer those expenses not in excess of seventy‑five thousand dollars.
9. Amortization of costs incurred to install pollution control devices and deducted pursuant to the internal revenue code or the amount of deduction for depreciation taken pursuant to the internal revenue code on pollution control devices for which an election is made pursuant to section 43‑1129.
10. The amount of depreciation or amortization of costs of child care facilities deducted pursuant to section 167 or 188 of the internal revenue code for which an election is made to amortize pursuant to section 43‑1130.
11. Arizona state income tax refunds received, to the extent the amount of the refunds is not already included in Arizona gross income, if a tax benefit was derived by deduction of this amount in a prior year.
12. The loss of an insurance company that is exempt under section 43‑1201 to the extent that it is included in computing Arizona gross income on a consolidated return pursuant to section 43‑947.
13. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under section 43‑1169 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.
14. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43‑1169 and which is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43‑1169.
15. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under either section 43‑1170 or 43‑1170.01 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.
16. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under either section 43‑1170 or 43‑1170.01 and which is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43‑1170 or 43‑1170.01, as applicable.
17. The deduction referred to in section 1341(a)(4) of the internal revenue code for restoration of a substantial amount held under a claim of right.
18. The amount by which a capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds the capital loss carryover allowable pursuant to section 43‑1130.01, subsection F.
19. Any amount deducted in computing Arizona taxable income as expenses for installing solar stub outs or electric vehicle recharge outlets in this state with respect to which a credit is claimed pursuant to section 43‑1176.
20. Any wage expenses deducted pursuant to the internal revenue code for which a credit is claimed under section 43‑1175 and representing net increases in qualified employment positions for employment of temporary assistance for needy families recipients.
21. Any amount of expenses that were deducted pursuant to the internal revenue code and for which a credit is claimed under section 43‑1178.
22. Any amount deducted for conveying ownership or development rights of property to an agricultural preservation district under section 48‑5702 for which a credit is claimed under section 43‑1180.
23. The amount of any deduction that is claimed in computing Arizona gross income and that represents a donation of a school site for which a credit is claimed under section 43‑1181.
24. Any amount deducted in computing Arizona taxable income as expenses for installing water conservation system plumbing stub outs in this state with respect to which a credit is claimed pursuant to section 43‑1182.
25. Any amount deducted pursuant to section 170 of the internal revenue code representing contributions to a school tuition organization for which a credit is claimed under section 43‑1183 or 43‑1184.
26. With respect to property for which an adjustment is made under section 43-1122, paragraph 19, one-fifth of the amount of the adjustment under section 43-1122, paragraph 19 for the year in which the adjustment is made and in each of the following four years. If the property is sold or otherwise disposed of during the taxable year, the taxpayer shall make the adjustment required under paragraph 27 of this section in lieu of the adjustment under this paragraph related to the property.
27. For property for which an adjustment was made under section 43‑1122, paragraph 19 and that is sold or otherwise disposed of during the taxable year, the amount by which the adjusted basis computed under the internal revenue code with respect to the property exceeds the adjusted basis of the property computed under this title.
Sec. 5. Section 43-1122, Arizona Revised Statutes, is amended to read:
43-1122. Subtractions from Arizona gross income; corporations
In computing Arizona taxable income for a corporation, the following amounts shall be subtracted from Arizona gross income:
1. The amounts computed pursuant to section 43‑1022, paragraphs 8 through 15, 27, 28, 30 and 31 7 through 13, 26, 27, 29 and 30. For the purposes of this paragraph, "federal adjusted gross income" as used in section 43‑1022 means "federal taxable income".
2. The amount of Arizona capital loss carryover as defined in section 43‑1124 in an amount not to exceed one thousand dollars.
3. With respect to a financial institution as defined in section 6‑101, expenses and interest relating to tax‑exempt income disallowed pursuant to section 265 of the internal revenue code.
4. Dividends received from another corporation owned or controlled directly or indirectly by a recipient corporation. For the purposes of this paragraph, "control" means direct or indirect ownership or control of fifty per cent or more of the voting stock of the payor corporation by the recipient corporation. Dividends shall have the meaning provided in section 316 of the internal revenue code. This subtraction shall apply without regard to section 43‑961, paragraph 2 and article 4 of this chapter. A corporation that has its commercial domicile, as defined in section 43‑1131, in this state may subtract the full amount of the dividends. A corporation that does not have its commercial domicile in this state may subtract:
(a) For its taxable year beginning in 1990, an amount equal to one‑half of the dividends.
(b) For taxable years beginning in 1991 and thereafter, the full amount of the dividends.
5. Interest income received on obligations of the United States.
6. The amount of dividend income from foreign corporations.
7. The amount of net operating loss allowed by section 43‑1123.
8. The amount of any state income tax refunds received which were included as income in computing federal taxable income.
9. The amount of expense recapture included in income pursuant to section 617 of the internal revenue code for mine exploration expenses.
10. The amount of deferred exploration expenses allowed by section 43‑1127.
11. The amount of exploration expenses related to the exploration of oil, gas or geothermal resources, computed in the same manner and on the same basis as a deduction for mine exploration pursuant to section 617 of the internal revenue code. This computation is subject to the adjustments contained in section 43‑1121, paragraph 8 and paragraphs 9 and 10 of this section relating to exploration expenses.
12. The amortization of pollution control devices allowed by section 43‑1129.
13. The amount of amortization of the cost of child care facilities pursuant to section 43‑1130.
14. The amount of income from a domestic international sales corporation required to be included in the income of its shareholders pursuant to section 995 of the internal revenue code.
15. The income of an insurance company that is exempt under section 43‑1201 to the extent that it is included in computing Arizona gross income on a consolidated return pursuant to section 43‑947.
16. The amount of contributions by the taxpayer during the taxable year to medical savings accounts established on behalf of the taxpayer's employees as provided by section 43‑1028, to the extent that the contributions are not deductible under the internal revenue code.
17. The amount by which a capital loss carryover allowable pursuant to section 43‑1130.01, subsection F exceeds the capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code.
18. An amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year computed as if the election described in section 168(k)(2)(D)(iii) of the internal revenue code had been made for each applicable class of property in the year the property was placed in service.
19. For property placed in service in taxable years beginning from and after December 31, 2013, the difference between the expense amount allowed pursuant to section 179 of the internal revenue code in determining the taxpayer's federal taxable income and the amount of the expense deduction that would be allowed pursuant to section 179 of the internal revenue code if the maximum deduction allowed were five hundred thousand dollars and this limitation were reduced by the amount that the cost of section 179 property placed in service in the taxable year exceeds two million dollars.
Sec. 6. Section 43-1127, Arizona Revised Statutes, is amended to read:
43-1127. Deferred exploration expenses
A. The amount of exploration expenses added to Arizona gross income pursuant to section 43‑1121, paragraph 8 may be subtracted on a ratable basis as the units of produced ores or minerals discovered or explored by reason of such expenditures are sold. An election made for any taxable year shall be binding for such year.
B. If such property is sold, it shall be treated in the same manner and on the same basis as property held for the production of income pursuant to section 43‑1021, paragraph 7 6 or section 43‑1022, paragraph 11 9.
Sec. 7. Retroactivity
Sections 43-1021, 43-1022, 43-1029, 43-1121, 43-1122 and 43-1127, Arizona Revised Statutes, as amended by this act, apply retroactively to taxable years beginning from and after December 31, 2013.