ARIZONA HOUSE OF REPRESENTATIVES Fifty-fifth Legislature First Regular Session
	House: WM DP 9-1-0-0

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HB 2879: conformity; internal revenue code; exception

Sponsor:  Representative Toma, LD 22

Caucus & COW

Overview

Conforms Arizona's income tax calculation for taxable years beginning January 1, 2021 to the changes made to the Internal Revenue Code (IRC), as amended, in effect on January 1, 2021.

History

Current law conforms Arizona's income tax calculation to the IRC of 1986, as amended, in effect on January 1, 2020, including those provisions that became effective during 2019 with the specific adoption of all retroactive effective dates. (A.R.S. § 43-105)

Generally, each year changes are made to the IRC that affect the Arizona income tax calculation. Tax conformity with the IRC is deemed necessary because the calculation of Arizona corporate income tax begins with federal taxable income. Additionally, federal adjusted gross income is the starting point for individual income tax.

Provisions

1. Conforms Arizona's income tax calculation for taxable years beginning January 1, 2021 to the IRC of 1986, as amended, in effect on January 1, 2021, including those provisions that became effective during 2020 with the specific adoption of all retroactive effective dates. (Sec. 2)

2. Conforms Arizona's income tax calculation for taxable year 2020 to the IRC of 1986, as amended, in effect on January 1, 2019 including those provisions of the Families First Coronavirus Response Act (P.L. 116-127), the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136), the Paycheck Protection Program Flexibility Act of 2020 (P.L. 116-142) and the Consolidated Appropriations Act, 2021 (P.L. 116-260) that are retroactively effective for taxable year 2020. (Sec. 2)

3. Conforms Arizona's income tax calculation for taxable year 2019 to the IRC of 1986, as amended, in effect on January 1, 2019  to further include the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136) and the Consolidated Appropriations Act, 2021 (P.L. 116-260) that are retroactively effective for taxable year 2019. (Sec. 2)

4. Conforms Arizona's income tax calculation for taxable year 2018 to the IRC of 1986, as amended, in effect on January 1, 2018  to further include the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136) and the Consolidated Appropriations Act, 2021 (P.L. 116-260) that are retroactively effective for taxable year 2019. (Sec. 2)

5. Removes the conformity language for taxable year 2010. (Sec. 2)

6. Creates an addition to Arizona gross income for taxable years 2018 through 2020 for the sum of the net operating loss deduction claimed on a taxpayer's federal return and the portion of the net operating loss deduction claimed on a taxpayer's federal return after subtracting a specific portion of the deduction taken. (Sec. 3)

7. Creates an addition to Arizona gross income for taxable years 2018 through 2020 for excess business loss allowed to offset income on a taxpayer's federal return. (Sec. 3)

8. Defines "Excess Business Loss." (Sec. 3)

9. Creates a subtraction from Arizona gross income for taxable years 2018 through 2020 for the net operating loss carryforward allowed under Arizona law. (Sec. 4)

10. Creates a net operating loss carryforward subtraction for losses on the federal return to the extent they were not allowed in prior years due to Arizona not conforming to Sections 2303 and 2304 of the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136). (Sec. 5)

11. Prevents the net operating loss carryforward subtraction to be taken twice. (Sec. 5)

12. Determines how the net operating loss carryforward subtraction is calculated. (Sec. 5)

13. Contains a retroactive clause. (Sec. 6)

14. Makes technical and conforming changes. (Sec. 1 and 2)

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                        HB 2879

Initials  VP       Page 0 Caucus & COW

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