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Senate Engrossed |
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State of Arizona Senate Fifty-third Legislature Second Regular Session 2018
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SENATE BILL 1454 |
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AN ACT
amending sections 43‑1021, 43‑1022, 43‑1024 and 43‑1042, Arizona Revised Statutes; relating to adjustments to Arizona gross income.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 43-1021, Arizona Revised Statutes, is amended to read:
43-1021. Addition to Arizona gross income
In computing Arizona adjusted gross income, the following amounts shall be added to Arizona gross income:
1. A beneficiary's share of the fiduciary adjustment to the extent that the amount determined by section 43‑1333 increases the beneficiary's Arizona gross income.
2. An amount equal to the ordinary income portion of a lump sum distribution that was excluded from federal adjusted gross income pursuant to the special rule for individuals who attained fifty years of age before January 1, 1986 under Public Law 99‑514, section 1122(h)(3).
3. The amount of interest income received on obligations of any state, territory or possession of the United States, or any political subdivision thereof, located outside the state of Arizona, reduced, for taxable years beginning from and after December 31, 1996, by the amount of any interest on indebtedness and other related expenses that were incurred or continued to purchase or carry those obligations and that are not otherwise deducted or subtracted in arriving at Arizona gross income.
4. The excess of a partner's share of partnership taxable income required to be included under chapter 14, article 2 of this title over the income required to be reported under section 702(a)(8) of the internal revenue code.
5. The excess of a partner's share of partnership losses determined pursuant to section 702(a)(8) of the internal revenue code over the losses allowable under chapter 14, article 2 of this title.
6. Any amount of agricultural water conservation expenses that were deducted pursuant to the internal revenue code for which a credit is claimed under section 43‑1084.
7. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under section 43‑1080 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.
8. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43‑1080 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43‑1080.
9. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under either section 43‑1081 or 43‑1081.01 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.
10. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43‑1074.02, 43‑1081 or 43‑1081.01 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43‑1074.02, 43‑1081 or 43‑1081.01, as applicable.
11. The deduction referred to in section 1341(a)(4) of the internal revenue code for restoration of a substantial amount held under a claim of right.
12. The amount by which a net operating loss carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds the net operating loss carryover or capital loss carryover allowable pursuant to section 43‑1029, subsection F.
13. Any wage expenses deducted pursuant to the internal revenue code for which a credit is claimed under section 43‑1087 and representing net increases in qualified employment positions for employment of temporary assistance for needy families recipients.
14. The amount of any depreciation allowance allowed pursuant to section 167(a) of the internal revenue code to the extent not previously added.
15. With respect to property for which an expense deduction was taken pursuant to section 179 of the internal revenue code in a taxable year beginning before January 1, 2013, the amount in excess of twenty‑five thousand dollars.
16. 15. The amount of a nonqualified withdrawal, as defined in section 15‑1871, from a college savings plan established pursuant to section 529 of the internal revenue code that is made to a distributee to the extent the amount is not included in computing federal adjusted gross income, except that the amount added under this paragraph shall not exceed the difference between the amount subtracted under section 43‑1022 in prior taxable years and the amount added under this section in any prior taxable years.
17. 16. The amount of discharge of indebtedness income that is deferred and excluded from the computation of federal adjusted gross income in the current taxable year pursuant to section 108(i) of the internal revenue code as added by section 1231 of the American recovery and reinvestment act of 2009 (P.L. 111‑5).
18. 17. The amount of any previously deferred original issue discount that was deducted in computing federal adjusted gross income in the current year pursuant to section 108(i) of the internal revenue code as added by section 1231 of the American recovery and reinvestment act of 2009 (P.L. 111‑5), to the extent that the amount was previously subtracted from Arizona gross income pursuant to section 43‑1022, paragraph 23 22.
19. 18. Amounts that are considered to be income under section 43‑1032, subsection D because the amount is withdrawn from a long‑term health care savings account and not used to pay the taxpayer's long‑term health care expenses.
20. 19. If a subtraction is or has been taken by the taxpayer under section 43‑1024, in the current or a prior taxable year for the full amount of eligible access expenditures paid or incurred to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101‑336) or title 41, chapter 9, article 8, any amount of eligible access expenditures that is recognized under the internal revenue code, including any amount that is amortized according to federal amortization schedules, and that is included in computing taxable income for the current taxable year.
21. 20. For taxable years beginning from and after December 31, 2017, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph:
(a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress for the payment of debts, public charges, taxes and dues.
(b) "Specie" means coins having precious metal content.
Sec. 2. Section 43-1022, Arizona Revised Statutes, is amended to read:
43-1022. Subtractions from Arizona gross income
In computing Arizona adjusted gross income, the following amounts shall be subtracted from Arizona gross income:
1. The amount of exemptions allowed by section 43‑1023.
2. Benefits, annuities and pensions in an amount totaling not more than two thousand five hundred dollars received from one or more of the following:
(a) The United States government service retirement and disability fund, retired or retainer pay of the uniformed services of the United States, the United States foreign service retirement and disability system and any other retirement system or plan established by federal law.
(b) The Arizona state retirement system, the corrections officer retirement plan, the public safety personnel retirement system, the elected officials' retirement plan, an optional retirement program established by the Arizona board of regents under section 15‑1628, an optional retirement program established by a community college district board under section 15‑1451 or a retirement plan established for employees of a county, city or town in this state.
3. A beneficiary's share of the fiduciary adjustment to the extent that the amount determined by section 43‑1333 decreases the beneficiary's Arizona gross income.
4. Interest income received on obligations of the United States, less any interest on indebtedness, or other related expenses, and deducted in arriving at Arizona gross income, which were incurred or continued to purchase or carry such obligations.
5. The excess of a partner's share of income required to be included under section 702(a)(8) of the internal revenue code over the income required to be included under chapter 14, article 2 of this title.
6. The excess of a partner's share of partnership losses determined pursuant to chapter 14, article 2 of this title over the losses allowable under section 702(a)(8) of the internal revenue code.
7. The amount allowed by section 43‑1025 for contributions during the taxable year of agricultural crops to charitable organizations.
8. The portion of any wages or salaries paid or incurred by the taxpayer for the taxable year that is equal to the amount of the federal work opportunity credit, the empowerment zone employment credit, the credit for employer paid social security taxes on employee cash tips and the Indian employment credit that the taxpayer received under sections 45A, 45B, 51(a) and 1396 of the internal revenue code.
9. The amount of prizes or winnings less than five thousand dollars in a single taxable year from any of the state lotteries established and operated pursuant to title 5, chapter 5.1, article 1.
10. The amount of exploration expenses that is determined pursuant to section 617 of the internal revenue code, that has been deferred in a taxable year ending before January 1, 1990 and for which a subtraction has not previously been made. The subtraction shall be made on a ratable basis as the units of produced ores or minerals discovered or explored as a result of this exploration are sold.
11. The amount included in federal adjusted gross income pursuant to section 86 of the internal revenue code, relating to taxation of social security and railroad retirement benefits.
12. To the extent not already excluded from Arizona gross income under the internal revenue code, compensation received for active service as a member of the reserves, the national guard or the armed forces of the United States, including compensation for service in a combat zone as determined under section 112 of the internal revenue code.
13. The amount of unreimbursed medical and hospital costs, adoption counseling, legal and agency fees and other nonrecurring costs of adoption not to exceed three thousand dollars. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife shall not exceed three thousand dollars. The subtraction under this paragraph may be taken for the costs that are described in this paragraph and that are incurred in prior years, but the subtraction may be taken only in the year during which the final adoption order is granted.
14. The amount authorized by section 43‑1027 for the taxable year relating to qualified wood stoves, wood fireplaces or gas fired fireplaces.
15. The amount by which a net operating loss carryover or capital loss carryover allowable pursuant to section 43‑1029, subsection F exceeds the net operating loss carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code.
16. Any amount of qualified educational expenses that is distributed from a qualified state tuition program determined pursuant to section 529 of the internal revenue code and that is included in income in computing federal adjusted gross income.
17. Any item of income resulting from an installment sale that has been properly subjected to income tax in another state in a previous taxable year and that is included in Arizona gross income in the current taxable year.
18. The amount authorized by section 43‑1030 relating to holocaust survivors.
19. For property placed in service:
(a) In taxable years beginning before December 31, 2012, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year computed as if the election described in section 168(k)(2)(D)(iii) of the internal revenue code had been made for each applicable class of property in the year the property was placed in service.
(b) In taxable years beginning from and after December 31, 2012 through December 31, 2013, an amount determined in the year the asset was placed in service based on the calculation in subdivision (a) of this paragraph. In the first taxable year beginning from and after December 31, 2013, the taxpayer may elect to subtract the amount necessary to make the depreciation claimed to date for the purposes of this title the same as it would have been if subdivision (c) of this paragraph had applied for the entire time the asset was in service. Subdivision (c) of this paragraph applies for the remainder of the asset's life. If the taxpayer does not make the election under this subdivision, subdivision (a) of this paragraph applies for the remainder of the asset's life.
(c) In taxable years beginning from and after December 31, 2013 through December 31, 2015, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year as computed as if the additional allowance for depreciation had been ten percent of the amount allowed pursuant to section 168(k) of the internal revenue code.
(d) In taxable years beginning from and after December 31, 2015 through December 31, 2016, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year as computed as if the additional allowance for depreciation had been fifty‑five percent of the amount allowed pursuant to section 168(k) of the internal revenue code.
(e) In taxable years beginning from and after December 31, 2016, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year as computed as if the additional allowance for depreciation had been the full amount allowed pursuant to section 168(k) of the internal revenue code.
20. With respect to property that is sold or otherwise disposed of during the taxable year by a taxpayer that complied with section 43‑1021, paragraph 14 with respect to that property, the amount of depreciation that has been allowed pursuant to section 167(a) of the internal revenue code to the extent that the amount has not already reduced Arizona taxable income in the current or prior taxable years.
21. With respect to property for which an adjustment was made under section 43‑1021, paragraph 15, an amount equal to one‑fifth of the amount of the adjustment pursuant to section 43‑1021, paragraph 15 in the year in which the amount was adjusted under section 43‑1021, paragraph 15 and in each of the following four years.
22. 21. The amount contributed during the taxable year to college savings plans established pursuant to section 529 of the internal revenue code to the extent that the contributions were not deducted in computing federal adjusted gross income. The amount subtracted shall not exceed:
(a) Two thousand dollars for a single individual or a head of household.
(b) Four thousand dollars for a married couple filing a joint return. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife shall not exceed four thousand dollars.
23. 22. The amount of any original issue discount that was deferred and not allowed to be deducted in computing federal adjusted gross income in the current taxable year pursuant to section 108(i) of the internal revenue code as added by section 1231 of the American recovery and reinvestment act of 2009 (P.L. 111‑5).
24. 23. The amount of previously deferred discharge of indebtedness income that is included in the computation of federal adjusted gross income in the current taxable year pursuant to section 108(i) of the internal revenue code as added by section 1231 of the American recovery and reinvestment act of 2009 (P.L. 111‑5), to the extent that the amount was previously added to Arizona gross income pursuant to section 43‑1021, paragraph 17 16.
25. 24. The portion of the net operating loss carryforward that would have been allowed as a deduction in the current year pursuant to section 172 of the internal revenue code if the election described in section 172(b)(1)(H) of the internal revenue code had not been made in the year of the loss that exceeds the actual net operating loss carryforward that was deducted in arriving at federal adjusted gross income. This subtraction only applies to taxpayers who made an election under section 172(b)(1)(H) of the internal revenue code as amended by section 1211 of the American recovery and reinvestment act of 2009 (P.L. 111‑5) or as amended by section 13 of the worker, homeownership, and business assistance act of 2009 (P.L. 111‑92).
26. 25. For taxable years beginning from and after December 31, 2013, the amount of any net capital gain included in federal adjusted gross income for the taxable year derived from investment in a qualified small business as determined by the Arizona commerce authority pursuant to section 41‑1518.
27. 26. An amount of any net long-term capital gain included in federal adjusted gross income for the taxable year that is derived from an investment in an asset acquired after December 31, 2011, as follows:
(a) For taxable years beginning from and after December 31, 2012 through December 31, 2013, ten percent of the net long-term capital gain included in federal adjusted gross income.
(b) For taxable years beginning from and after December 31, 2013 through December 31, 2014, twenty percent of the net long-term capital gain included in federal adjusted gross income.
(c) For taxable years beginning from and after December 31, 2014, twenty‑five percent of the net long-term capital gain included in federal adjusted gross income. For the purposes of this paragraph, a transferee that receives an asset by gift or at the death of a transferor is considered to have acquired the asset when the asset was acquired by the transferor. If the date an asset is acquired cannot be verified, a subtraction under this paragraph is not allowed.
28. 27. If an individual is not claiming itemized deductions pursuant to section 43‑1042, the amount of premium costs for long-term care insurance, as defined in section 20‑1691.
29. 28. With respect to a long-term health care savings account established pursuant to section 43‑1032, the amount deposited by the taxpayer in the account during the taxable year to the extent that the taxpayer's contributions are included in the taxpayer's federal adjusted gross income.
30. 29. The amount of eligible access expenditures paid or incurred during the taxable year to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101‑336) or title 41, chapter 9, article 8 as provided by section 43‑1024.
31. 30. For taxable years beginning from and after December 31, 2017, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph:
(a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress for the payment of debts, public charges, taxes and dues.
(b) "Specie" means coins having precious metal content.
Sec. 3. Section 43-1024, Arizona Revised Statutes, is amended to read:
43-1024. Americans with disabilities act access expenditures
A. For taxable years beginning from and after December 31, 2017, in computing Arizona adjusted gross income, a subtraction is allowed under section 43‑1022, paragraph 30 29 for eligible business access expenditures paid or incurred by the taxpayer during the taxable year in order to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101‑336) or title 41, chapter 9, article 8 by retrofitting developed real property that was originally placed in service at least ten years before the current taxable year.
B. For the purposes of this section, eligible business access expenditures Include reasonable and necessary amounts paid or incurred to:
1. Remove any barriers that prevent a business from being accessible to or usable by individuals with disabilities.
2. Provide qualified interpreters or other methods of making audio materials available to hearing-impaired individuals.
3. Provide qualified readers, taped texts and other effective methods of making visually delivered materials available to individuals with visual impairments.
4. Acquire or modify equipment or devices for individuals with disabilities.
5. Provide other similar services, modifications, materials or equipment.
C. A taxpayer who has been cited for noncompliance with the Americans with disabilities act of 1990 or title 41, chapter 9, article 8 by either federal or state enforcement officials is ineligible for a subtraction under this section for any expenditure required to cure the cited violation.
Sec. 4. Section 43-1042, Arizona Revised Statutes, is amended to read:
43-1042. Itemized deductions
A. Except as provided by subsections B and D E of this section, at the election of the taxpayer, and in lieu of the standard deduction allowed by section 43‑1041, in computing taxable income the taxpayer may take the amount of itemized deductions allowable for the taxable year pursuant to subtitle A, chapter 1, subchapter B, parts VI and VII, but subject to the limitations prescribed by sections 67, 68 and 274, of the internal revenue code.
B. In lieu of the amount of the federal itemized deduction for expenses paid for medical care allowed under section 213 of the internal revenue code, the taxpayer may deduct the full amount of such expenses.
C. Notwithstanding subsection B of this section, expenses for long‑term health care that are paid or reimbursed from the taxpayer's long‑term health care savings account pursuant to section 43‑1032 shall not be deducted pursuant to this section.
D. At the taxpayer's election, With respect to property for which an expense deduction was taken pursuant to the internal revenue code, in a taxable year beginning from and after December 31, 2017, the taxpayer may deduct the full amount allowed by section 168(k) or section 179 of the internal revenue code.
D. E. A taxpayer shall not claim both a deduction provided by this section and a credit allowed by this title with respect to the same charitable contributions.
E. F. The taxpayer may add any interest expense paid by the taxpayer for the taxable year that is equal to the amount of federal credit for interest on certain home mortgages allowed by section 25 of the internal revenue code.