Assigned to FIN                                                                                                  AS PASSED BY COMMITTEE

 

 

 

 


ARIZONA STATE SENATE

Fifty-Seventh Legislature, Second Regular Session

 

AMENDED

FACT SHEET FOR H.B. 2016

 

tax returns; late filing; penalties

Purpose

Retroactive to January 1, 2026, prohibits a late filing penalty from being assessed on a taxpayer if the taxpayer's income tax liability is zero.

Background

If a taxpayer fails to make and file a tax return by the due date, the penalty is 4.5 percent of the tax required to be shown on the return which must be added to the tax for each month or fraction of a month elapsing between the return's due date and the date the return is filed. The total late filing penalty may not exceed 25 percent of the tax found to be remaining due.

If a taxpayer fails or refuses to file a return on notice and demand by the Arizona Department of Revenue (ADOR), the taxpayer must pay a penalty of 25 percent of the tax in addition to any late filing penalty. ADOR may abate the late filing and notice and demand filing penalties when it is found that the failure is due to reasonable cause. Reasonable cause means a reasonable basis for the taxpayer to believe that the tax did not apply to the business activity or the storage, use or consumption of the taxpayer's tangible personal property in Arizona (A.R.S.
§ 42-1125).

Except as otherwise outlined, monies received for and belonging to the state are deposited in the state treasury and credited to the state General Fund (A.R.S. § 35-142). If prohibiting late filing penalties from being assessed when tax liability is zero results in a change to civil penalty revenues that would have otherwise been collected and deposited in the state General Fund, there may be a fiscal impact to the state General Fund associated with this legislation.

Provisions

1.   Prohibits a late filing penalty from being assessed on a taxpayer if the taxpayer's income tax liability is zero.

2.   Becomes effective on the general effective date, retroactive to January 1, 2026.

Amendments Adopted by Committee

· Removes the late filing penalty exemption for transaction privilege tax taxpayers.

 

House Action                                                           Senate Action

WM           1/21/26            DP       8-1-0-0               FIN             3/16/26          DPA            4-2-1-0

3rd Read    2/23/26                        42-15-3

Prepared by Senate Research

March 17, 2026

MG/hk