Bill Text: AZ HB2778 | 2020 | Fifty-fourth Legislature 2nd Regular | Engrossed
Bill Title: Taxation; omnibus
Spectrum: Partisan Bill (Republican 9-0)
Status: (Engrossed - Dead) 2020-02-25 - Senate read second time [HB2778 Detail]
Download: Arizona-2020-HB2778-Engrossed.html
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House Engrossed |
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State of Arizona House of Representatives Fifty-fourth Legislature Second Regular Session 2020
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HOUSE BILL 2778 |
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AN ACT
Repealing section 28‑2007, Arizona Revised Statutes; amending sections 41‑1752, 43‑1011, 43‑1021, 43‑1022, 43‑1024, 43‑1041, 43‑1121, 43‑1122, 43‑1123, 43‑1124, 43‑1127 and 43‑1130.01, Arizona Revised Statutes; relating to taxation.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Repeal
Section 28-2007, Arizona Revised Statutes, is repealed from and after December 31, 2020.
Sec. 2. Section 41-1752, Arizona Revised Statutes, is amended to read:
41-1752. Arizona highway patrol fund
A. An Arizona highway patrol fund is established.
B. The Arizona highway patrol fund consists of:
1. Monies distributed to the fund from the Arizona highway user revenue fund by the legislature subject to section 28‑6537.
2. Miscellaneous service fees.
3. Rewards.
4. Awards.
5. Insurance recoveries.
6. Receipts from the sale or disposal of any property held by the Arizona highway patrol or purchased with Arizona highway patrol monies.
7. Monies received from the public safety personnel retirement system pursuant to section 20‑224.01.
8. Monies deposited pursuant to section 28‑3513.
9. Monies deposited pursuant to section 28‑2007.
C. Subject to legislative appropriation, the patrol superintendent shall administer and spend monies in the Arizona highway patrol fund in conformity with the laws governing state financial operations.
D. Monies in the Arizona highway patrol fund:
1. Do not revert to the state general fund or Arizona highway user revenue fund.
2. Are exempt from the provisions of section 35‑190 relating to lapsing of appropriations.
E. Subject to legislative appropriation, monies in the Arizona highway patrol fund shall be used to administer the provisions of law relating to the highway patrol and the Arizona highway patrol reserve and all matters pertaining to those laws, except that monies received pursuant to subsection B, paragraph 7 of this section shall be used for the department of public safety.
Sec. 3. Section 43-1011, Arizona Revised Statutes, is amended to read:
43-1011. Taxes and tax rates
A. There shall be levied, collected and paid for each taxable year on the entire taxable income of every resident of this state and on the entire taxable income of every nonresident that is derived from sources within this state taxes determined in the following manner:
1. For taxable years beginning from and after December 31, 1996 through December 31, 1997:
(a) In the case of a single person or a married person filing separately:
If taxable income is: The tax is:
$0 - $10,000 2.90% of taxable income
$10,001 - $25,000 $290, plus 3.30% of the excess over $10,000
$25,001 - $50,000 $785, plus 3.90% of the excess over $25,000
$50,001 - $150,000 $1,760, plus 4.80% of the excess over $50,000
$150,001 and over $6,560, plus 5.17% of the excess over $150,000
(b) In the case of a married couple filing a joint return or a single person who is a head of a household:
If taxable income is: The tax is:
$0 - $20,000 2.90% of taxable income
$20,001 - $50,000 $580, plus 3.30% of the excess over $20,000
$50,001 - $100,000 $1,570, plus 3.90% of the excess over $50,000
$100,001 - $300,000 $3,520, plus 4.80% of the excess over $100,000
$300,001 and over $13,120, plus 5.17% of the excess over $300,000
2. For taxable years beginning from and after December 31, 1997 through December 31, 1998:
(a) In the case of a single person or a married person filing separately:
If taxable income is: The tax is:
$0 - $10,000 2.88% of taxable income
$10,001 - $25,000 $288, plus 3.24% of the excess over $10,000
$25,001 - $50,000 $774, plus 3.82% of the excess over $25,000
$50,001 - $150,000 $1,729, plus 4.74% of the excess over $50,000
$150,001 and over $6,469, plus 5.10% of the excess over $150,000
(b) In the case of a married couple filing a joint return or a single person who is a head of a household:
If taxable income is: The tax is:
$0 - $20,000 2.88% of taxable income
$20,001 - $50,000 $576, plus 3.24% of the excess over $20,000
$50,001 - $100,000 $1,548, plus 3.82% of the excess over $50,000
$100,001 - $300,000 $3,458, plus 4.74% of the excess over $100,000
$300,001 and over $12,938, plus 5.10% of the excess over $300,000
3. For taxable years beginning from and after December 31, 1998 through December 31, 2005:
(a) In the case of a single person or a married person filing separately:
If taxable income is: The tax is:
$0 - $10,000 2.87% of taxable income
$10,001 - $25,000 $287, plus 3.20% of the excess over $10,000
$25,001 - $50,000 $767, plus 3.74% of the excess over $25,000
$50,001 - $150,000 $1,702, plus 4.72% of the excess over $50,000
$150,001 and over $6,422, plus 5.04% of the excess over $150,000
(b) In the case of a married couple filing a joint return or a single person who is a head of a household:
If taxable income is: The tax is:
$0 - $20,000 2.87% of taxable income
$20,001 - $50,000 $574, plus 3.20% of the excess over $20,000
$50,001 - $100,000 $1,534, plus 3.74% of the excess over $50,000
$100,001 - $300,000 $3,404, plus 4.72% of the excess over $100,000
$300,001 and over $12,844, plus 5.04% of the excess over $300,000
4. For taxable years beginning from and after December 31, 2005 through December 31, 2006:
(a) In the case of a single person or a married person filing separately:
If taxable income is: The tax is:
$0 - $10,000 2.73% of taxable income
$10,001 - $25,000 $273, plus 3.04% of the excess over $10,000
$25,001 - $50,000 $729, plus 3.55% of the excess over $25,000
$50,001 - $150,000 $1,617, plus 4.48% of the excess over $50,000
$150,001 and over $6,097, plus 4.79% of the excess over $150,000
(b) In the case of a married couple filing a joint return or a single person who is a head of a household:
If taxable income is: The tax is:
$0 - $20,000 2.73% of taxable income
$20,001 - $50,000 $546, plus 3.04% of the excess over $20,000
$50,001 - $100,000 $1,458, plus 3.55% of the excess over $50,000
$100,001 - $300,000 $3,233, plus 4.48% of the excess over $100,000
$300,001 and over $12,193, plus 4.79% of the excess over $300,000
5. Subject to subsections B and C of this section, for taxable years beginning from and after December 31, 2006 through December 31, 2018:
(a) In the case of a single person or a married person filing separately:
If taxable income is: The tax is:
$0 - $10,000 2.59% of taxable income
$10,001 - $25,000 $259, plus 2.88% of the excess over $10,000
$25,001 - $50,000 $691, plus 3.36% of the excess over $25,000
$50,001 - $150,000 $1,531, plus 4.24% of the excess over $50,000
$150,001 and over $5,771, plus 4.54% of the excess over $150,000
(b) In the case of a married couple filing a joint return or a single person who is a head of a household:
If taxable income is: The tax is:
$0 - $20,000 2.59% of taxable income
$20,001 - $50,000 $518, plus 2.88% of the excess over $20,000
$50,001 - $100,000 $1,382, plus 3.36% of the excess over $50,000
$100,001 - $300,000 $3,062, plus 4.24% of the excess over $100,000
$300,001 and over $11,542, plus 4.54% of the excess over $300,000
6. Subject to subsection D of this section, For taxable years beginning from and after December 31, 2018 through December 31, 2019:
(a) In the case of a single person or a married person filing separately:
If taxable income is: The tax is:
$0 ‑ $26,500 2.59% of taxable income
$26,501 ‑ $53,000 $686, plus 3.34% of the amount
over $26,500
$53,001 ‑ $159,000 $1,571, plus 4.17% of the
amount over $53,000
$159,001 and over $5,991, plus 4.50% of the amount
over $159,000
(b) In the case of a married couple filing a joint return or a single person who is a head of a household:
If taxable income is: The tax is:
$0 ‑ $53,000 2.59% of taxable income
$53,001 ‑ $106,000 $1,373, plus 3.34% of the amount over $53,000
$106,001 ‑ $318,000 $3,143, plus 4.17% of the amount
over $106,000
$318,001 and over $11,983, plus 4.50% of the amount over $318,000
7. Subject to subsection D of this section, for taxable years beginning from and after December 31, 2019:
(a) in the case of a single person or a married person filing separately:
if taxable income is: the tax is:
$0 ‑ $26,500 2.53% of taxable income
$26,501 ‑ $53,000 $670, plus 3.28% of the amount
over $26,500
$53,001 ‑ $159,000 $1,540, plus 4.11% of the
amount over $53,000
$159,001 and over $5,896, plus 4.45% of the amount
over $159,000
(b) In the case of a married couple filing a joint return or a single person who is a head of a household:
if taxable income is: the tax is:
$0 ‑ $53,000 2.53% of taxable income
$53,001 ‑ $106,000 $1,341, plus 3.28% of the amount over $53,000
$106,001 ‑ $318,000 $3,079, plus 4.11% of the amount
over $106,000
$318,001 and over $11,792, plus 4.45% of the amount over $318,000
B. For the taxable year beginning from and after December 31, 2014 through December 31, 2015, the department shall adjust the income dollar amounts for each rate bracket prescribed by subsection A, paragraph 5 of this section according to the average annual change in the metropolitan Phoenix consumer price index published by the United States department of labor, bureau of labor statistics. The revised dollar amounts shall be raised to the nearest whole dollar. The income dollar amounts for each rate bracket may not be revised below the amounts prescribed in the prior taxable year.
C. For each taxable year beginning from and after December 31, 2015 through December 31, 2018, the department shall adjust the income dollar amounts for each rate bracket prescribed by subsection A, paragraph 5 of this section according to the average annual change in the metropolitan Phoenix consumer price index published by the United States department of labor, bureau of labor statistics. The revised dollar amounts shall be raised to the nearest whole dollar. The income dollar amounts for each rate bracket may not be revised below the amounts prescribed in the prior taxable year.
D. For each taxable year beginning from and after December 31, 2019, the department shall adjust the income dollar amount for each rate bracket prescribed by subsection A, paragraph 6 7 of this section according to the average annual change in the metropolitan Phoenix consumer price index published by the United States department of labor, bureau of labor statistics. The revised dollar amounts shall be raised to the nearest whole dollar. The income dollar amounts for each rate bracket may not be revised below the amounts prescribed in the prior taxable year.
Sec. 4. Section 43-1021, Arizona Revised Statutes, is amended to read:
43-1021. Addition 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 the special rule for individuals who attained fifty years of age before January 1, 1986 under Public Law 99‑514, section 1122(h)(3).
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 taxable 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. 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.
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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. The amount of any depreciation allowance allowed pursuant to section 167(a) of the internal revenue code to the extent not previously added.
15. 14. 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.
16. 15. The amount of discharge of indebtedness income that is deferred and excluded from the computation of federal adjusted gross 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).
17. 16. The amount of any previously deferred original issue discount that was deducted in computing federal adjusted gross 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 21 19.
18. 17. If a subtraction is or has been taken by the taxpayer under section 43‑1024, in the current or a prior taxable year for the full amount of eligible access expenditures paid or incurred to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101‑336) or title 41, chapter 9, article 8, any amount of eligible access expenditures that is recognized under the internal revenue code, including any amount that is amortized according to federal amortization schedules, and that is included in computing taxable income for the current taxable year.
19. 18. For taxable years beginning from and after December 31, 2017, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph:
(a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues.
(b) "Specie" means coins having precious metal content.
Sec. 5. 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 $2,500 received from one or more of the following:
(a) The United States government service retirement and disability fund, the United States foreign service retirement and disability system and any other retirement system or plan established by federal law, except retired or retainer pay of the uniformed services of the United States that qualify qualifies for a subtraction under paragraph 29 28 of this section.
(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. Interest income received on obligations of the United States, minus any interest on indebtedness, or other related expenses, and deducted in arriving at Arizona gross income, that were incurred or continued to purchase or carry such obligations.
5. 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.
6. 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.
7. The amount allowed by section 43‑1025 for contributions during the taxable year of agricultural crops to charitable organizations.
8. 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.
9. 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.
10. 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.
11. 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.
12. The amount of unreimbursed medical and hospital costs, adoption counseling, legal and agency fees and other nonrecurring costs of adoption not to exceed $3,000. 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 $3,000. 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.
13. The amount authorized by section 43‑1027 for the taxable year relating to qualified wood stoves, wood fireplaces or gas fired fireplaces.
14. 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.
15. 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.
16. 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.
17. The amount authorized by section 43‑1030 relating to holocaust survivors.
18. 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 through December 31, 2015, 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 percent of the amount allowed pursuant to section 168(k) of the internal revenue code.
(d) In taxable years beginning from and after December 31, 2015 through December 31, 2016, 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 fifty‑five percent of the amount allowed pursuant to section 168(k) of the internal revenue code.
(e) In taxable years beginning from and after December 31, 2016, 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 the full amount allowed pursuant to section 168(k) of the internal revenue code.
19. 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 14 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.
20. 18. 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) $2,000 for a single individual or a head of household.
(b) $4,000 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 $4,000.
21. 19. The amount of any original issue discount that was deferred and not allowed to be deducted in computing federal adjusted gross 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).
22. 20. The amount of previously deferred discharge of indebtedness income that is included in the computation of federal adjusted gross 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 16 15.
23. 21. 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).
24. 22. 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.
25. 23. 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 and before January 1, 2020, as follows:
(a) For taxable years beginning from and after December 31, 2012 through December 31, 2013, ten percent 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 percent 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 percent 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.
24. An amount of fifty percent of the 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, 2019.
26. 25. 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.
27. 26. The amount of eligible access expenditures paid or incurred during the taxable year to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101‑336) or title 41, chapter 9, article 8 as provided by section 43‑1024.
28. 27. For taxable years beginning from and after December 31, 2017, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph:
(a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues.
(b) "Specie" means coins having precious metal content.
29. 28. Benefits, annuities and pensions received as retired or retainer pay of the uniformed services of the United States in amounts as follows:
(a) For taxable years through December 31, 2018, an amount totaling not more than $2,500.
(b) For taxable years beginning from and after December 31, 2018, an amount totaling not more than $3,500.
Sec. 6. Section 43-1024, Arizona Revised Statutes, is amended to read:
43-1024. Americans with disabilities act access expenditures
A. For taxable years beginning from and after December 31, 2017, in computing Arizona adjusted gross income, a subtraction is allowed under section 43‑1022, paragraph 27 26 for eligible business access expenditures paid or incurred by the taxpayer during the taxable year in order to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101‑336) or title 41, chapter 9, article 8 by retrofitting developed real property that was originally placed in service at least ten years before the current taxable year.
B. For the purposes of this section, eligible business access expenditures include reasonable and necessary amounts paid or incurred to:
1. Remove any barriers that prevent a business from being accessible to or usable by individuals with disabilities.
2. Provide qualified interpreters or other methods of making audio materials available to hearing-impaired individuals.
3. Provide qualified readers, taped texts and other effective methods of making visually delivered materials available to individuals with visual impairments.
4. Acquire or modify equipment or devices for individuals with disabilities.
5. Provide other similar services, modifications, materials or equipment.
C. A taxpayer who has been cited for noncompliance with the Americans with disabilities act of 1990 or title 41, chapter 9, article 8 by either federal or state enforcement officials is ineligible for a subtraction under this section for any expenditure required to cure the cited violation.
Sec. 7. Section 43-1041, Arizona Revised Statutes, is amended to read:
43-1041. Optional standard deduction
A. A taxpayer may elect to take a standard deduction as follows:
1. In the case of a single person or a married person filing separately, the standard deduction is $12,200, subject to subsection H of this section.
2. In the case of a single person who is a head of a household, the standard deduction is $18,350, subject to subsection H of this section.
3. In the case of a married couple filing a joint return, the standard deduction is $24,400, subject to subsection H of this section.
B. The standard deduction provided for in subsection A of this section is in lieu of all itemized deductions allowed by section 43‑1042, which are to be subtracted from Arizona adjusted gross income in computing taxable income.
C. The standard deduction is allowed if the taxpayer so elects. The election is made by the taxpayer claiming on the tax return the amount provided for in this section in lieu of the itemized deductions allowed under section 43‑1042. Electing to file a short form return or a simplified return that does not allow itemized deductions to be claimed is considered to be an election to claim the standard deduction.
D. In the case of a husband and wife, the standard deduction provided for in subsection A of this section is not allowed to either if the taxable income of one of the spouses is determined without regard to the standard deduction.
E. The standard deduction provided for by subsection A of this section is not allowed in the case of a taxable year of less than twelve months on account of a change in the accounting period.
F. Except as provided in subsection G of this section, a change of an election to take, or not to take, the standard deduction for any taxable year may be made after the filing of the return for that year.
G. A taxpayer is not allowed to change an election to take, or not to take, the standard deduction if:
1. The spouse of the taxpayer filed a separate return for any taxable year corresponding, for the purposes of subsection D of this section, to the taxable year of the taxpayer unless both of the following apply:
(a) The spouse makes a change of election with respect to the standard deduction for the taxable year covered in the separate return consistent with the change of election sought by the taxpayer.
(b) The taxpayer and spouse consent in writing to the assessment, within such a period as may be agreed on with the department, of any deficiency, to the extent attributable to the change of election, even though at the time of filing the consent the assessment of the deficiency would otherwise be prevented by the operation of any law or rule of law.
2. The tax liability of the taxpayer or the taxpayer's spouse for the taxable year has been compromised.
H. For each taxable year beginning from and after December 31, 2019, the department shall adjust the dollar amounts prescribed by subsection A, paragraphs 1, 2 and 3 of this section for inflation in the same manner in which the federal basic standard deduction is adjusted for inflation pursuant to section 63 of the internal revenue code.
I. For taxable years beginning from and after December 31, 2018, the standard deduction allowed under subsection A of this section shall be increased by the amount equal to twenty‑five percent of the total amount of a taxpayer's charitable deductions that would have been allowed if the taxpayer elected to claim itemized deductions under section 43‑1042 rather than elect the standard deduction. For taxable years beginning from and after December 31, 2019, the department shall adjust the percentage prescribed in this subsection according to the average annual change in the metropolitan Phoenix consumer price index published by the United States department of labor, bureau of labor statistics, except that the adjusted percentage may not exceed one hundred percent. The revised percentage shall be raised to the nearest whole percent and may not be revised below the amounts prescribed in the prior taxable year.
Sec. 8. 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 amount of interest income received on obligations of any state, territory or possession of the United States, or any political subdivision thereof, located outside this state, reduced, for taxable 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.
2. 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.
3. 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.
4. The amount of any depreciation allowance allowed pursuant to section 167(a) of the internal revenue code to the extent not previously added.
5. 4. The amount of discharge of indebtedness income that is deferred and excluded from the computation of 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).
6. 5. The amount of any previously deferred original issue discount that was deducted in computing 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 43‑1122, paragraph 6 5.
7. 6. The amount of dividend income received from corporations and allowed as a deduction pursuant to sections 243, 245, 245A and 250(a)(1)(B) of the internal revenue code.
8. 7. Taxes that are based on income paid to states, local governments or foreign governments and that were deducted in computing federal taxable income.
9. 8. 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.
10. 9. 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 that are paid or accrued to the controlled domestic international sales corporation and that shall be deducted by the payor. For the purposes of this paragraph, "control" means direct or indirect ownership or control of fifty percent or more of the voting stock of the domestic international sales corporation by the payor corporation.
11. 10. The amount of net operating loss taken pursuant to section 172 of the internal revenue code.
12. 11. The amount of exploration expenses determined pursuant to section 617 of the internal revenue code to the extent that they exceed $75,000 and to the extent that the election is made to defer those expenses not in excess of $75,000.
13. 12. 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.
14. 13. 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.
15. 14. 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.
16. 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 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.
17. 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 section 43‑1169 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43‑1169.
18. 17. 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.
19. 18. 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 that 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.
20. 19. 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.
21. 20. 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.
22. 21. 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.
23. 22. Any amount of expenses that were deducted pursuant to the internal revenue code and for which a credit is claimed under section 43‑1178.
24. 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.
25. 24. 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. 25. If a subtraction is or has been taken by the taxpayer under section 43‑1124, in the current or a prior taxable year for the full amount of eligible access expenditures paid or incurred to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101‑336) or title 41, chapter 9, article 8, any amount of eligible access expenditures that is recognized under the internal revenue code, including any amount that is amortized according to federal amortization schedules, and that is included in computing Arizona taxable income for the current taxable year.
27. 26. For taxable years beginning from and after December 31, 2017, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph:
(a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues.
(b) "Specie" means coins having precious metal content.
Sec. 9. 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 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.
2. 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.
3. The amount allowed by section 43‑1025 for contributions during the taxable year of agricultural crops to charitable organizations.
4. 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.
5. With respect to property that is sold or otherwise disposed of during the taxable year by a taxpayer that complied with section 43‑1121, paragraph 4 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 taxable year or prior taxable years.
6. 5. The amount of any original issue discount that was deferred and not allowed to be deducted in computing 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).
7. 6. The amount of previously deferred discharge of indebtedness income that is included in the computation of 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 43‑1121, paragraph 5 4.
8. 7. 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.
9. 8. 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 percent 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.
10. 9. Interest income received on obligations of the United States.
11. 10. The amount of dividend income from foreign corporations. For the purposes of this paragraph, gross up income as described in section 78 of the internal revenue code, global intangible low-taxed income as defined in section 951A of the internal revenue code and subpart F income as defined in section 952 of the internal revenue code shall be considered foreign dividends.
12. 11. The amount of net operating loss allowed by section 43‑1123.
13. 12. The amount of any state income tax refunds received that were included as income in computing federal taxable income.
14. 13. The amount of expense recapture included in income pursuant to section 617 of the internal revenue code for mine exploration expenses.
15. 14. The amount of deferred exploration expenses allowed by section 43‑1127.
16. 15. 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 12 13 and paragraphs 13 and 14 and 15 of this section relating to exploration expenses.
17. 16. The amortization of pollution control devices allowed by section 43‑1129.
18. 17. The amount of amortization of the cost of child care facilities pursuant to section 43‑1130.
19. 18. 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.
20. 19. 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.
21. 20. 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.
22. 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)(7) of the internal revenue code had been made for each applicable class of property in the year the property was placed in service.
23. 21. The amount of eligible access expenditures paid or incurred during the taxable year to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101‑336) or title 41, chapter 9, article 8 as provided by section 43‑1124.
24. 22. For taxable years beginning from and after December 31, 2017, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph:
(a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues.
(b) "Specie" means coins having precious metal content.
Sec. 10. Section 43-1123, Arizona Revised Statutes, is amended to read:
43-1123. Net operating loss; definition
A. For the purposes of this section, "net operating loss" means:
1. In the case of a taxpayer who has a net operating loss for the taxable year within the meaning of section 172(c) of the internal revenue code, the amount of the net operating loss increased by the subtractions specified in section 43‑1122, except the subtraction allowed in section 43‑1122, paragraph 12 11, and reduced by the additions specified in section 43‑1121.
2. In the case of a taxpayer not described in paragraph 1 of this subsection, any excess of the subtractions specified in section 43‑1122, except the subtraction allowed in section 43‑1122, paragraph 12 11, over the sum of the Arizona gross income plus the additions specified in section 43‑1121.
B. If for any taxable year the taxpayer has a net operating loss:
1. Such net operating loss shall be a net operating loss carryover for:
(a) Each of the five succeeding taxable years for net operating losses arising in taxable periods through December 31, 2011.
(b) Each of the twenty succeeding taxable years for net operating losses arising in taxable periods beginning from and after December 31, 2011.
2. The carryover in the case of each such succeeding taxable year, other than the first succeeding taxable year, shall be the excess, if any, of the amount of such net operating loss over the sum of the taxable income for each of the intervening years computed by determining the net operating loss subtraction for each intervening taxable year, without regard to such net operating loss or to the net operating loss for any succeeding taxable year.
C. The amount of the net operating loss subtraction shall be the aggregate of the net operating loss carryovers to the taxable year.
Sec. 11. Section 43-1124, Arizona Revised Statutes, is amended to read:
43-1124. Americans with disabilities act access expenditures
A. For taxable years beginning from and after December 31, 2017, in computing Arizona taxable income, a subtraction is allowed under section 43‑1122, paragraph 23 21 for eligible business access expenditures paid or incurred by the taxpayer during the taxable year in order to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101‑336) or title 41, chapter 9, article 8 by retrofitting developed real property that was originally placed in service at least ten years before the current taxable year.
B. For the purposes of this section, eligible business access expenditures include reasonable and necessary amounts paid or incurred to:
1. Remove any barriers that prevent a business from being accessible to or usable by individuals with disabilities.
2. Provide qualified interpreters or other methods of making audio materials available to hearing-impaired individuals.
3. Provide qualified readers, taped texts and other effective methods of making visually delivered materials available to individuals with visual impairments.
4. Acquire or modify equipment or devices for individuals with disabilities.
5. Provide other similar services, modifications, materials or equipment.
C. A taxpayer that has been cited for noncompliance with the Americans with disabilities act of 1990 or title 41, chapter 9, article 8 by either federal or state enforcement officials is ineligible for a subtraction under this section for any expenditure required to cure the cited violation.
Sec. 12. Section 43-1127, Arizona Revised Statutes, is amended to read:
43-1127. Deferred exploration expenses
The amount of exploration expenses added to Arizona gross income pursuant to section 43‑1121, paragraph 12 11 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 is binding for that year.
Sec. 13. Section 43-1130.01, Arizona Revised Statutes, is amended to read:
43-1130.01. 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 43‑1121, paragraph 20 19, 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 $3,000.
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 carried over under this chapter to the same extent and in the same manner as provided under section 43‑1123, and under prior law.
(b) A carryover beyond the taxable year may not 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:
(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, 1987.
(ii) Carried back and carried over to the same extent and in the same manner as provided under section 1212 of the internal revenue code for taxable years beginning from and after December 31, 1987.
(b) A carryover beyond the taxable year may not 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. 14. Retroactivity
Sections 43‑1011, 43‑1021, 43‑1022, 43‑1024, 43‑1041, 43‑1121, 43‑1122, 43‑1123, 43‑1124, 43‑1127 and 43‑1130.01, Arizona Revised Statutes, as amended by this act, apply retroactively to taxable years beginning from and after December 31, 2019.
Sec. 15. Effective date
Section 41-1752, Arizona Revised Statutes, as amended by this act, is effective from and after December 31, 2020.
