ARIZONA STATE SENATE

RESEARCH STAFF

MOLLY GRAVER

LEGISLATIVE RESEARCH ANALYST

FINANCE COMMITTEE

Telephone: (602) 926-3171

TO:                  MEMBERS OF THE SENATE

MILITARY AFFAIRS & BORDER SECURITY COMMITTEE

DATE:            February 11, 2026

SUBJECT:      Strike everything amendment to S.B. 1365, relating to property tax; exemption; veterans; disabilities

Purpose

Exempts a veteran with a service or nonservice-connected disability from the requirement for the veteran's household income to not exceed the statutory income cap in order to qualify for a property tax exemption.

Background

All property in Arizona is subject to taxation with certain exemptions outlined in the Arizona Constitution and prescribed by statute. The property of Arizona residents who are widows, widowers, persons with total and permanent disabilities or veterans with service or
nonservice-connected disabilities are exempt from property tax subject to the conditions and limitations prescribed by statute.

To qualify for a property tax exemption, a claimant's total income from all sources is subject to a statutory cap which is adjusted for inflation annually. The household's total income from all sources may not exceed: 1) $39,865, for households with no children under 18 years old; or 2) 47,826, for households with children under 18 years old or children with a total and permanent disability.

A widow, widower, person with a total and permanent disability or veteran with a service or nonservice-connected disability must initially establish eligibility for the property tax exemption by filing an affidavit with the county assessor. Each following year, the person must annually calculate income from the preceding year to ensure that the person still qualifies for the exemption and notify the county assessor of any event that disqualifies the person from further exemption (A.R.S. §§ 42-11002 and 42-11111).

If exempting veterans with a service or nonservice-connected disability from the statutory income cap changes the population that is eligible for a property tax exemption and results in a tax shift that affects the obligations of the state, there may be a fiscal impact to the state General Fund.

Provisions

1. Exempts a veteran with a service or nonservice-connected disability from the income cap.

2. Applies the exemption from the income cap to taxable years beginning January 1, 2027.

3. Makes conforming changes.

4. Becomes effective on the general effective date.