SB1010 - 472R - House Bill Summary

House of Representatives

SB 1010

national guard compensation; tax subtraction

Sponsor: Senator Waring

DP	Committee on Counties, Municipalities and Military Affairs
DP	Committee on Ways and Means
x	Caucus and COW
	As Engrossed and As Passed the House

SB 1010 creates an income tax subtraction for compensation paid to Arizona National Guard members.

History

Under Federal Law, compensation, other than allowances, received for military service including active duty, reserve training and reenlistment bonuses can be taxed as wages. Approximately half the states follow federal practice and levy taxes on active duty military pay. Five states completely exempt military pay from taxation while another five states provide a partial exemption. Additionally, at least eleven states including Arizona exempt combat pay.

Arizona passed legislation last year that provides an income tax exemption for active military service compensation during tax year 2006. HB 2795 will make the exemption permanent at a cost of approximately $10.3 M to the state General Fund.

In addition, Laws 2005, chapter 264 allowed for a one thousand dollar tax credit for the employer of a full-time employee who is deployed as a member of the Arizona National Guard.

There are approximately 7,000 National Guard members in Arizona who are qualified to serve during state and national emergencies. Estimates provided by the Department of Emergency and Military Services (DEMA) state that a National Guardsman who is married with dependents makes a salary of approximately $4,043 per month ($48,516 annually) and a single National Guardsman can expect to make $3,575 monthly ($42,900).

The approximate number of Reserve members currently in Arizona can be broken down as follows: 1,884 members of the Army Reserve, 2,041 members of the Air Force Reserve, 721 members of the Navy Reserve and 470 members of the Marine Corps Reserve for 5116 members in total.

There is a fiscal note prepared on this bill.

Provisions

· Establishes an additional income tax subtraction for compensation, bonuses and allowances received by service as a member of the United States Armed Forces including active service and reserve members or the Arizona National Guard.

· Limits this subtraction to five thousand dollars or less.

· Becomes effective on January 1, 2007.

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· Forty-seventh Legislature