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ARIZONA HOUSE OF REPRESENTATIVES57th Legislature, 2nd Regular Session |
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HB 4037: individual income tax; credit; education
Sponsor: Representative Peña, LD 23
Committee on Ways & Means
Overview
Creates the education opportunity tax credit, specifies how much the tax credit is worth and how eligibility is determined.
History
Arizona Empowerment Scholarship Accounts were established to provide options for the education of students in Arizona. These funds must be used for education in at least one of the subject areas of reading, grammar, mathematics, social studies and science (A.R.S § 15-2402).
Individual income tax is levied on an Arizona resident's taxable income at a single tax rate of 2.5%. The calculation of Arizona individual income tax begins with the federal adjusted gross income. Statue also authorizes various tax credits that reduce a taxpayer's income liability (A.R.S. Title 43, Chapter 10). A tax credit is a dollar-for-dollar reduction of a taxpayer’s individual income tax liability. A credit is different from a subtraction, exemption, or deduction, which reduces the amount of income that will be taxed JLBC 2025 Tax Handbook.
Provisions
1. Requires the Joint Legislative Income Tax Credit Review Committee to review the education opportunity tax credit, in years ending in a one or a six. (Sec. 1)
2. Requires the Department of Revenue (DOR) to prescribe a short form return for individual taxpayers who elect to file for the education opportunity tax credit. (Sec. 2)
3. Requires DOR to provide a simplified return form for individual taxpayers who elect to claim the dependent tax credit and the education opportunity tax credit. (Sec. 2)
4. Specifies the amount of the tax credit is:
a. for a qualifying child who was not enrolled in a public school and did not participate in an Arizona Empowerment Scholarship Account during the taxable year, the amount of the tax credit is equal to 80% of the base support level.
b. For a qualifying child who was either enrolled in a public school or participated in an Arizona Empowerment Scholarship Account for 50% or less of the instructional days of the taxable year, the amount of the tax credit is equal to 40% of the base support level. (Sec. 3)
5. Specifies if the allowable amount of the tax credit amount exceeds the taxes otherwise due for the taxable year, after applying all other credits and after any setoffs to state agencies, political subdivisions and courts, the taxpayer is entitled to the excess amount and is required to be refunded by DOR. (Sec. 3)
6. Requires DOR to adopt rules and prescribe forms to administer these requirements and can consult ADE to determine whether a qualifying child of a taxpayer who is claiming the tax credit was enrolled in a public school or participated in an Arizona Empowerment Scholarship Account. (Sec. 3)
7. Defines Qualifying Child. (Sec. 3)
8. Applies to taxable years beginning January 1. 2026. (Sec. 3)
9. Contains a purpose clause. (Sec. 4)
10. Makes technical and conforming changes. (Sec. 1,2)
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14. Initials VP/CS HB 4037
15. 2/12/2026 Page 0 Ways & Means
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