SB1156 - 472R - House Bill Summary

House of Representatives

SB 1156

internal revenue code conformity

Sponsor: Senator Martin

X	Committee on Ways and Means
	Caucus and COW
	As Engrossed and As Passed the House

SB 1156 conforms the Arizona tax statues with the Internal Revenue Code (IRC).

History

Since 1978, the provisions of the federal IRC have been adopted by the Arizona State Legislature to conform the computation of Arizona income tax and other statutory references throughout the Arizona Revised Statutes with the IRC as amended by federal legislation enacted in the previous year. This is necessary because Arizona statute requires taxpayers to use federal adjusted gross income (as defined in the IRC) as the starting point for state income tax assessment.

SB 1156 updates the definition of the IRC for tax year 2006 to the federal IRC in effect on January 1, 2006, excluding the three provisions where Arizona did not previously conform to the federal changes. For the 30 percent special bonus depreciation provided in the Job Creation and Worker Assistance Act of 2002, and both the 50 percent bonus depreciation and Section 179 expensing in the Jobs and Growth Tax Relief Reconciliation Act of 2003, Arizona taxpayers must make an adjustment to add back the amount taken at the federal level to calculate Arizona income tax.

The bill was amended in the Senate to conform the carry-forward provisions for net operating losses to the federal provisions. Arizona currently allows a 5 year carryforward while the federal government allows a 20 year carryforward.

According to the Department of Revenue the fiscal impact to the state General Fund from the conformity provision is a negative ($2.58 million) in FY 2005-2006 and ($2.74 million) in FY 2006-2007 and ($0.65million) in FY 2007-2008 and ($1.04 million) in FY 2008-2009. The Joint Legislative Budget Committee (JLBC) prepared a fiscal note on HB 2341 relating to net operating loss. The fiscal impact cannot be determined with certainty.

Provisions

· Updates the definition of “internal revenue code” as follows:

· Tax year 2006 includes all provisions that were in effect as of January 1, 2006 including provisions passes with retroactive federal effective dates.

· Tax year 2005 includes all provisions passed with retroactive federal effective dates between December 31, 2004 and December 31, 2005.

· Tax year 2004 includes all provision passed with retroactive federal effective dates between December 31, 2003 and December 31, 2004.

· Removes the definition of “internal revenue code” for tax year 1995.

· Allows a corporate taxpayer to carry over a net operating loss for 20 years.

· ---------- DOCUMENT FOOTER ---------

· Forty-seventh Legislature