Assigned to FIN                                                                                                          AS PASSED BY THE SENATE

ARIZONA STATE SENATE

Forty-seventh Legislature, First Regular Session

AMENDED

FACT SHEET FOR S.B. 1010

national guard compensation; tax subtraction

Purpose

            Establishes an income tax subtraction for compensation received by members of the Armed Forces of the United States, including members of the Arizona National Guard.

Background

            Based on a report published by the Maguire Company and the ESI Corporation, and information provided by the Arizona National Guard, an estimated 21,400 Arizona residents serve full-time in the military, 5,400 serve as reservists and 7,200 are enlisted in the National Guard, totaling 34,000 Arizonans in military service.

Laws 2005, Chapter 264 created a $1,000 tax credit for employers with full-time employees who are members of the Arizona National Guard placed on active duty.  Laws 2005, Chapter 115 established a check-off on the individual income tax form for contributions to the National Guard Relief Fund (Fund).  Fund monies are required to be used to provide financial assistance to families of Arizona National Guard members when the member is placed on active duty and is serving in a combat zone.  Laws 2005, Chapter 303, allowed individuals to subtract all compensation for active duty service as a member of the Armed Forces only for tax year 2006.

S.B. 1010 allows an income tax subtraction for compensation, bonuses and allowances received by a taxpayer for service as a member of the Armed Forces of the United States, including reservists and members of the Arizona National Guard, not to exceed $5,000.

According to the Joint Legislative Budget Committee fiscal note, the estimated fiscal impact is a maximum of $5.1 million in the state General Fund annually. If the Legislature extends the current one-year income tax subtraction for all active duty military compensation, the incremental impact of the S.B. 1010 will be no greater than $1.9 million.

Provisions

1. Allows compensation, bonuses and allowances received by a taxpayer for service as a member of the Armed Forces of the United States, including reservists and members of the Arizona National Guard, not to exceed $5,000, to be subtracted from gross income.

2. Becomes effective on January 1, 2007.

Amendments Adopted by Committee

· Adds an effective date of January 1, 2007.

Amendments Adopted by Committee of the Whole

Adds all members of the Armed Service and reservists.

Senate Action

FIN                 2/16/06     DPA     7-0-2

3^rd Read           3/15/06                  27-0-2

Prepared by Senate Research

March 20, 2006

SL/HG/ac