Assigned to FIN FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
Increases the allowable state income tax subtraction for retainer and retirement benefit, annuity and pension pay from the Uniformed Services of the United States (Uniformed Services).
Current statute defines Arizona gross income for individual taxpayers as an individual's federal adjusted gross income for the relevant taxable year, computed pursuant to the Internal Revenue Code. Arizona gross income is then used to compute Arizona adjusted gross income, pursuant to additions and subtractions established in statute (A.R.S. § 43-1001).
Under current law, among the allowable subtractions from Arizona gross income used to arrive at Arizona adjusted gross income is a subtraction of up to $2,500 for benefits, annuities and pensions received from one or more of either: 1) the United States government service retirement and disability fund, retirement or retainer pay of the Uniformed Services, and other federal retirement systems or plans; or 2) the Arizona State Retirement System, other state retirement plans and programs, and retirement plans established by a subdivision of the state (A.R.S. § 43-1022).
Typically, after 20 years of service, members of the Uniformed Services are eligible for retirement, including pension payments from the federal government. Federal law defines Uniformed Services as the Army, Navy, Air Force, Marine Corps, Coast Guard, the National Oceanic and Atmospheric Administration, and the Public Health Service (37 U.S.C. § 101).
There may be a negative fiscal impact to the state General Fund due to the increases in allowable income tax subtractions made by this legislation.
1. Creates a new subtraction from Arizona gross income for benefits, annuities and pensions received as retirement or retainer pay of the Uniformed Services equal to an amount not more than:
a) for Tax Year 2017, $2,500;
b) for Tax Year 2018, $6,250; and
c) for Tax Year 2019 and after, $10,000.
2. Becomes effective on the general effective date.
Prepared by Senate Research
January 22, 2018