ARIZONA STATE SENATE
Forty-seventh Legislature, Second Regular Session
FACT SHEET FOR S.B. 1546
tax investment; phaseout
Purpose
Allows a percentage of net capital gains to be subtracted from Arizona gross income.
Background
The individual income tax is levied on the personal income of full-time residents and pro-rated for part-time residents of Arizona. The starting point for Arizona individual income tax is the federal adjusted gross income.
A capital gain is the difference between what was paid for an investment and what was received when it was sold. Investments include mutual funds, bonds, stocks, options, precious metals, real estate and collectibles. Capital gains and losses are classified as long-term or short-term, depending on how long the property was held before it was sold. Items held for one year or less are considered short-term, long-term are items held longer than one year. The maximum capital gain rates for 2005 are 5, 15, 25 and 28 percent.
S.B. 1546 subtracts 10 percent of net capital gains included in federal adjusted gross income from Arizona gross income in 2006 and increases the subtraction by 10 percent increments each year until 2015.
S.B. 1546 will have a negative fiscal impact to the state General Fund due to decreased individual and corporate income tax collections.
Provisions
1. Allows a subtraction, for Arizona individual and corporate income tax purposes, of 10 percent of net capital gains included in federal adjusted gross income in 2006. The percentage allowed to be subtracted increases by 10 percent increments each year until 2015.
2. Makes technical and conforming changes.
3. Becomes effective on the general effective date, retroactive to January 1, 2006.
Prepared by Senate Research
February 14, 2006
SL/HG/jas