ARIZONA
HOUSE OF REPRESENTATIVES
|
HB2526: conformity; internal revenue code; exceptions. |
||
|
PRIME SPONSOR: Representative Toma, LD 22 BILL STATUS: Caucus & COW |
|
|
Partially conforms Arizona's
income tax calculation to the changes made to the Internal Revenue Code (IRC)
effective on January 1, 2018.
History
The Arizona Legislature annually conforms the Arizona Revised Statutes to any federal provisions that became effective in the preceding calendar year. Tax conformity with the IRC is needed because the calculation of Arizona corporate income tax calculation begins with federal taxable income. Similarly, federal adjusted gross income is the starting point for the Arizona individual income tax calculation.
The federal Tax Cuts and Jobs Act (U.S. TCJA) enacted on December 22, 2017, includes over 100 provisions and represents the largest revision to the IRC in more than 30 years. The latest estimate of impact detailed by the Joint Legislative Budget Committee (JLBC) states that the impact of fully conforming to these IRC changes would be a revenue gain of approximately $155,000,000.
Provisions
Conformity
1. Updates the statutory definition of the IRC to include provisions in effect as of January 1, 2018. (Sec. 1)
2. Repeals this section from and after December 31, 2019. (Sec. 1)
3. Decouples income tax provisions from the U.S. TCJA by creating the following additions and subtractions from Arizona taxable income: (Sec. 2)
Individual Additions to Taxable Income
4. Adds the following amounts to Arizona gross income:
a. the depreciation allowable under section 167(a) of the IRC as if the additional allowance had been the full amount allowed pursuant to section 168(k) of the IRC; and
b. any amount deducted under IRC section 179 relating to expensing certain business assets to the extent not previously added. (Sec. 2)
5. Adds the amount that would have been excluded pursuant to section 68 of the IRC relating to the overall limitation on itemized deductions. (Sec. 2)
6. Repeals this section from and after December 31, 2019. (Sec. 2)
Individual Itemized Deductions
7. Allows the taxpayer to deduct in lieu of the standard deduction: (Sec. 3)
a. the amount of state taxes and local taxes paid to the extent that they were not deducted in
b. computing federal taxable income;
c. miscellaneous itemized deductions to the extent that the aggregate amount of miscellaneous itemized deductions exceeds two percent of federal adjusted gross income and was not deducted in computing federal taxable income;
d. home equity indebtedness interest and acquisition indebtedness interest to the extent that it was not deducted in computing federal taxable income;
e. business losses of a pass-through entity to the extent that they were not deducted in computing federal taxable income. If the deduction is taken, the taxpayer may not deduct the amount of business losses carried over from the taxable year beginning from and after December 31, 2017, through December 31, 2018;
f. an amount equal to the depreciation allowable in the IRC for the taxable year as computed as if the additional allowance for depreciation had been 50 percent of the amount allowed; and
g. the amount deducted related to expensing certain business assets not to exceed $500,000 or $500,000 minus the amount by which the cost of that property placed in service during the taxable year exceeds $2,000,000, whichever is less. (Sec. 3)
8. Repeals this section from and after December 31, 2019. (Sec. 3)
Corporate Additions to Taxable Income
9. Requires a corporate taxpayer, for tax year 2018, to add any amount deducted pursuant to IRC section 179 relating to expensing certain business assets to the extent not previously added. (Sec. 4)
10. Repeals this section from and after December 31, 2019. (Sec. 4)
Corporate Subtractions from Taxable Income
11. Requires a corporate taxpayer, for the taxable year beginning from and after December 31, 2017 through December 31, 2018, to subtract from Arizona gross income the amount deducted related to expensing certain business assets not to exceed $500,000 or $500,000 minus the amount by which the cost of that property placed in service during the taxable year exceeds $2,000,000, whichever is less. (Sec. 5)
12. Repeals this section from and after December 31, 2019. (Sec. 5)
Miscellaneous
13. Applies retroactively to taxable years beginning from and after December 31, 2017. (Sec. 6)
14. Contains an emergency clause. (Sec. 7)
15. Makes technical and conforming changes.
16.
17.
18. ---------- DOCUMENT FOOTER ---------
19. Fifty-fourth Legislature HB 2526
20. First Regular Session Version 1: CaucusCOW
21.
22. ---------- DOCUMENT FOOTER ---------