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ARIZONA HOUSE OF REPRESENTATIVES57th Legislature, 2nd Regular Session |
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HB 4152: 2026-2027; taxation; omnibus.
Sponsor: Representative Livingston, LD 28
Committee on Appropriations
Overview
Makes changes related to taxation in the transaction privilege tax (TPT) and use tax, individual and corporate income tax statutes. Declares the state's election to participate in the federal tax credit for individuals who make qualified contributions to school granting organizations (SGOs) and outlines the certification and administration requirements.
History
Current law conforms Arizona's income tax calculation to the Internal Revenue Code (IRC) of 1986, as amended, in effect on January 1, 2025, including those provisions that became effective during 2024 with the specific adoption of all retroactive effective dates, but excluding any changes to the code enacted after January 1, 2025. (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 and the federal adjusted gross income (FAGI) is the starting point for individual income tax. These amounts are then modified by additions and subtractions to arrive at the Arizona taxable income.
On July 4, 2025, major federal tax changes were enacted through H.R. 1 that impact federal taxable income and FAGI which the state would conform to by updating the statutory definition of the IRC.
Provisions
Conformity
1. Updates the statutory definition of IRC to include all provisions in effect as of January 1, 2026, with the specific adoption of all the retroactive effective dates, but excluding any changes to the IRC enacted after January 1, 2026. (Sec. 11, 21)
2. Updates the definition of IRC, for Tax Year (TY) 2025 to include the provisions of Public Law 119-21 that became retroactively effective during TY 2025. (Sec. 21)
3. Specifies the taxable years for the retroactive provisions associated with Public Law 119-21. (Sec. 21)
Subtractions from Arizona Gross Income
4. Includes, for taxable years beginning January 1, 2025, the following subtractions from Arizona gross income (AGI) to the extent they are not already excluded from AGI under the IRC:
a. the amount of qualified tips received during the TY that is deducted under Section 24 of the IRC and
b. the amount of qualified overtime compensation received during the TY that is deducted under Section 225 of the IRC. (Sec. 25)
5. Includes, for taxable years beginning January 1, 2026, the following subtractions from AGI to the extent they are not already excluded from AGI under the IRC:
a. the amount of a distribution from an account established pursuant to Section 530A of the IRC;
b. the amount of qualifying child and dependent care expenses; and
c. the amount allowed under A.R.S. § 43-1030, not to exceed $6,000 or $12,000 depending on filing status, relating to distributions from a pension or retirement account for taxpayers that are 60 years old before the close of the taxable year; and
d. the amount contributed, not to exceed $6,000 or $12,000 depending on filing status, to a Roth individual retirement account. (Sec. 25, 26)
6. Includes, for Tax Year 2025, the following subtractions from AGI to the extent they are not already excluded from AGI under the IRC:
a. the amount allowed for a qualifying senior, who turns 65 years old during the taxable year, under the federal deduction for seniors and
b. the amount of qualified passenger vehicle loan interest under Section 163(h)(4). (Sec. 25)
7. Defines Pension, Qualified Individual and Retirement Account. (Sec. 26)
Deductions from Taxable Income
8. Redefines standard deduction to the amount of the federal basic standard deduction pursuant to Section 63 of the IRC. (Sec. 27)
9. Allows, for taxable years beginning January 1, 2026, a taxpayer that takes the standard deduction to increase the deduction by an amount equal to the total amount of the taxpayer's charitable contributions, rather than up to 25 percent of qualifying contributions, and caps the contributions at:
a. $1,000 for a single person or married person filing separately; and
b. $2,000 for a married couple filing jointly (Sec. 27)
10. Limits, beginning January 1, 2026, the itemized deduction for state and local taxes to $10,000, (Sec. 28)
Dependent Tax Credit
11. Increases the dependent tax credit, effective January 1, 2026, from $100 to $125. (Sec. 29)
Solar Energy Device Exemptions
12. Repeals, effective July 1, 2026, the Transaction Privilege and Use tax exemptions on the sales of solar energy devices. (Sec. 16, 17, 18, 48)
Renewable Energy Production Tax Credit
13. Repeals, effective January 1, 2026, the individual and corporate income tax credit for renewable energy production. (Sec. 32, 36, 47, 49)
Residential Solar Energy Devices Tax Credit
14. Repeals, effective January 1, 2026, the individual income tax credit for solar energy devices. (Sec. 32, 47, 49)
Pollution Control Equipment Tax Credit
15. Repeals, effective January 1, 2026, the corporate income tax credit for pollution control equipment. (Sec. 40, 47, 49)
Individual, Corporate and Insurance Premium Tax Credit
16. Repeals, effective January 1, 2026, the insurance premium tax credit for new employment. (Sec. 3)
17. Repeals, effective January 1, 2026, the tax credits for new employment for qualified positions. (Sec. 10)
18. Repeals, effective January 1, 2026, the individual income tax credit for new employment. (Sec. 30)
19. Repeals, effective January 1, 2026, the corporate income tax credit for new employment. (Sec. 36)
Research and Development Tax Credit
20. Repeals, effective January 1, 2026, the individual and corporate income tax credit for research and development. (Sec. 31, 39, 48, 49)
Rio Nuevo
21. Repeals, effective July 1, 2026, the distribution of multipurpose facility revenue to district statute. (Sec. 15)
Scholarship Granting Organizations
22. Declares that Arizona elects to participate in the federal tax credit for individuals who make qualified contributions to SGOs. (Sec.41)
23. Requires the Department of Revenue (DOR) to comply with all federal laws and regulations to administer the federal SGO credit to ensure Arizona is eligible to participate in taxable years beginning January 1, 2027, and to annually submit all required information to the U.S. Secretary of the Treasury for Participation. (Sec. 41)
24. Allows a nonprofit organization in Arizona that is exempt, or that has applied for exemption, from federal taxation to apply to DOR for certification as an SGO and requires DOR to certify that the SGO meets the federal requirements and applicable regulations or guidance issued by the U.S. Secretary of the Treasury. (Sec.41)
25. Requires DOR, by January 1 of each year, to a) submit to the U.S. Secretary of the Treasury a list of certified SGOs located in Arizona; and b) post the list on DOR's official website. (Sec.41)
26. Requires DOR to adopt rules and publish and prescribe forms and procedures necessary to administer SGO certification requirements. (Sec.41)
27. Allows, beginning January 1, 2027, an DOR-certified SGO that is on the list submitted to the U.S. Secretary of the Treasury to provide scholarships to eligible students for any qualified elementary or secondary education expenses to the extent allowed under federal law. (Sec.41)
Miscellaneous
28. Contains an applicability clause. (Sec. 47)
29. Contains retroactivity provisions. (Sec. 48)
30. Contains a savings clause. (Sec. 49)
31. Makes technical and conforming changes.
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Initials VP HB 4152
4/27/2026 Page 0 Appropriations
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