SB1861 - 572R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 20-224, Arizona Revised Statutes, is amended to read:

START_STATUTE20-224. Premium tax; reports

A. On or before March 1 of each year, each authorized domestic insurer, each other insurer and each formerly authorized insurer referred to in section 20-206, subsection B shall file with the director a report in a form prescribed by the director showing total direct premium income including policy membership and other fees and all other considerations for insurance from all classes of business whether designated as a premium or otherwise received by it during the preceding calendar year on account of policies and contracts covering property, subjects or risks located, resident or to be performed in this state, after deducting from such total direct premium income applicable cancellations, returned premiums, the amount of reduction in or refund of premiums allowed to industrial life policyholders for payment of premiums direct to an office of the insurer and all policy dividends, refunds, savings coupons and other similar returns paid or credited to policyholders within this state and not reapplied as premiums for new, additional or extended insurance. No deduction shall be made of the cash surrender values of policies or contracts. Considerations received on annuity contracts, as well as the unabsorbed portion of any premium deposit, shall not be included in total direct premium income, and neither shall be subject to tax. The report shall separately indicate the total direct fire insurance premium income received from property located in the incorporated cities and towns certified by the office of the state fire marshal pursuant to section 9-951, subsection B, as procuring the services of a private fire company.

B. Coincident with the filing of the tax report, each insurer shall pay to the director for deposit, pursuant to sections 35-146 and 35-147, a tax on such net premiums at the following rates:

1. For fire insurance:

(a) On property located in a city or town certified by the office of the state fire marshal pursuant to section 9-951, subsection B, as procuring the services of a private fire company, .66 percent.

(b) On all other property, 2.2 percent.

2. For disability insurance, 2.0 percent.

3. For health care service plans, the rates prescribed under sections 20-837, 20-1010 and 20-1060.

4. For other insurance:

(a) For premiums received in calendar year 2016, 1.95 percent.

(b) For premiums received in calendar year 2017, 1.90 percent.

(d) For premiums received in calendar year 2019, 1.80 percent.

(e) For premiums received in calendar year 2020, 1.75 percent.

(f) For premiums received in calendar year 2021 and for each subsequent calendar year, 1.70 percent.

C. Any payments of tax pursuant to subsection F of this section shall be deducted from the tax payable pursuant to subsection B of this section. Each insurer shall reflect the cost savings attributable to the lower tax in fire insurance premiums charged on property located in an incorporated city or town certified by the office of the state fire marshal pursuant to section 9-951, subsection B, as procuring the services of a private fire company. No insurer shall be liable to the state or to any other person, or shall be subject to regulatory action, relating to the calculation or submittal of fire insurance premium taxes based in good faith on the office of the state fire marshal's certification.

D. Eighty-five percent of the tax paid under this section by an insurer on account of premiums received for fire insurance shall be separately specified in the report and shall be apportioned in the manner provided by sections 9-951, 9-952 and 9-972, except that all of the tax so allocated to a fund of a municipality or fire district that has no volunteer firefighters or pension obligations to volunteer firefighters shall be appropriated to the account of the municipality or fire district in the public safety personnel retirement system and all of the tax so allocated to a fund of a municipality or fire district that has both full-time paid firefighters and volunteer firefighters or pension obligations to full-time paid firefighters or volunteer firefighters shall be appropriated to the account of the municipality or fire district in the public safety personnel retirement system where it shall be reallocated by actuarial procedures proportionately to the municipality or fire district for the account of the full-time paid firefighters and to the municipality or fire district for the account of the volunteer firefighters. A municipality or fire district shall provide to the public safety personnel retirement system all information that the system deems necessary to perform the reallocation prescribed by this section. A full accounting of the reallocation shall be forwarded to the municipality or fire district and its local boards.

E. This section does not apply to title insurance. Title insurers shall be taxed as provided in section 20-1566.

F. Any insurer that paid or is required to pay a tax of $50,000 or more on net premiums received during the preceding calendar year, pursuant to subsection B of this section and sections 20-224.01, 20-837, 20-1010, 20-1060 and 20-1097.07, shall file on or before the fifteenth day of each month from March through August a report for that month, on a form prescribed by the director, accompanied by a payment in an amount equal to fifteen percent of the amount paid or required to be paid during the preceding calendar year pursuant to subsection B of this section and sections 20-224.01, 20-837, 20-1010, 20-1060 and 20-1097.07. The payments are due and payable on or before the fifteenth day of each month and shall be made to the director for deposit, pursuant to sections 35-146 and 35-147.

G. Except for the tax paid on fire insurance premiums pursuant to subsections B and D of this section, an insurer may claim a premium tax credit if the insurer qualifies for a credit pursuant to section 20-224.03, 20-224.04, 20-224.06 or 20-224.07.

H. On receipt of a properly documented claim, a refund shall be provided to an insurer from available funds for the excess amount of any fire insurance premium improperly paid by the insurer. The insurer shall reflect the refund in the fire insurance premiums charged on the property that was charged the excessive amount.

I. On or before September 30 of each year, the director of the department of insurance and financial institutions shall report to the directors of the joint legislative budget committee and the governor's office of strategic planning and budgeting on the amount of insurance premium tax credits established by sections 20-224.03, 20-224.04, 20-224.05, 20-224.06 and 20-224.07 that were used during the previous fiscal year.

J. For the purposes of:

1. Subsection B of this section, fire insurance is one hundred percent of fire lines, forty percent of commercial multiple peril nonliability lines, thirty-five percent of homeowners' multiple peril lines, twenty-five percent of farm owners' multiple peril lines and twenty percent of allied lines.

2. Section 20-416, fire insurance is eighty-five percent of fire and allied lines.

K. From and after December 31, 2017, the director may require that reports and payments under this section be submitted electronically. If the director requires electronic submission, the director shall include on the department's official website a list of one or more acceptable third-party services through which an insurer must submit reports and payments. END_STATUTE

Sec. 2. Section 20-224.01, Arizona Revised Statutes, is amended to read:

START_STATUTE20-224.01. Additional premium tax; civil penalty

A. Coincident with the filing of the tax report as required in section 20-224, each insurer shall pay to the director, for deposit, pursuant to sections 35-146 and 35-147, a tax of .4312 percent of such net premiums received from all insurance carried for or on vehicles as defined in section 28-101, in addition to other applicable taxes.

B. The tax of .4312 percent of such net premiums received by the director and paid by an insurer on account of premiums received for insurance on certain vehicles as defined in section 28-101 shall be separately specified in the insurer's report required in section 20-224 and is appropriated to the public safety personnel retirement system and shall be transferred by the state treasurer to the board of trustees of the public safety personnel retirement system for deposit in the highway patrol account. If the tax received is greater than the amount necessary to fund the highway patrol account, beginning in the 1991-1992 fiscal year the state treasurer shall deposit the excess in the Arizona highway patrol fund established by section 41-1752 in any amount required by legislative appropriation.

C. An insurer shall report and pay the taxes required by this section in the manner prescribed by section 20-224. An insurer who that fails to pay the tax on or before the prescribed payment dates is subject to a civil penalty determined pursuant to section 20-225.

D. An insurer shall not claim a premium tax credit pursuant to section 20-224.03 for the premium taxes paid pursuant to this section.END_STATUTE

Sec. 3. Repeal

Section 20-224.03, Arizona Revised Statutes, is repealed.

Sec. 4. Section 20-837, Arizona Revised Statutes, is amended to read:

START_STATUTE20-837. Tax exemption; exceptions

A. Every corporation doing business pursuant to this article is declared to be a nonprofit and benevolent institution and to be exempt from state, county, district, municipal and school taxes, including the taxes prescribed by this title, and excepting only the fees prescribed by section 20-167 and taxes on real and tangible personal property located within this state. Each corporation is subject to a state tax of 2.0 percent on net premiums that are received to effect or maintain the corporation's subscription contracts, except that the tax shall not apply with respect to any coverage concerning which the corporation's relationship is as administrative or fiscal agent for national, state or municipal government or any political subdivision or body thereof, and such tax shall not apply with respect to any premiums received from funds of national, state or municipal government or any political subdivision or body thereof. The tax shall be determined, filed and reported in the manner prescribed in section 20-224. The failure by a corporation to pay the tax on or before the prescribed payment dates results in a civil penalty determined pursuant to section 20-225.

B. A corporation may claim a premium tax credit if the corporation qualifies for a credit pursuant to section 20-224.03.END_STATUTE

Sec. 5. Section 20-1010, Arizona Revised Statutes, is amended to read:

START_STATUTE20-1010. Taxes

A. On the tax payment dates prescribed in section 20-224, each prepaid dental plan organization shall pay to the director for deposit, pursuant to sections 35-146 and 35-147, in a form prescribed by the director a tax for transacting a prepaid dental plan in the amount of 2.0 percent of prepaid net charges received from members.

B. The failure by an organization to pay the tax imposed by this section results in a civil penalty determined pursuant to section 20-225.

C. A prepaid dental plan organization may claim a premium tax credit if the organization qualifies for a credit pursuant to section 20-224.03. END_STATUTE

Sec. 6. Section 20-1060, Arizona Revised Statutes, is amended to read:

START_STATUTE20-1060. Taxes; exemption

A. Except as provided in subsection C of this section, on the tax payment dates prescribed in section 20-224, each health care services organization shall pay to the director for deposit, pursuant to sections 35-146 and 35-147, in a form prescribed by the director a tax for transacting a health care plan in the amount of 2.0 percent of net charges received from enrollees.

B. The failure by an organization to pay the tax imposed by this section results in a civil penalty determined pursuant to section 20-225.

C. Payments received by health care services organizations from the United States secretary of health and human services pursuant to a contract issued pursuant to 42 United States Code section 1395mm(g) are not taxable under this section.

D. A health care services organization may claim a premium tax credit if the organization qualifies for a credit pursuant to section 20-224.03. END_STATUTE

Sec. 7. Section 20-1097.07, Arizona Revised Statutes, is amended to read:

START_STATUTE20-1097.07. Fees and taxes

A. Any prepaid legal insurance corporation licensed pursuant to this article shall pay those fees prescribed by section 20-167 and those taxes prescribed by section 20-224.

B. A prepaid legal insurance corporation may claim a premium tax credit if the corporation qualifies for a credit pursuant to section 20-224.03. END_STATUTE

Sec. 8. Repeal

Sections 41-1507 and 41-1525, Arizona Revised Statutes, are repealed.

Sec. 9. Section 42-1001, Arizona Revised Statutes, is amended to read:

START_STATUTE42-1001. Definitions

In this title, unless the context otherwise requires:

1. "Board" or "state board" means either the state board of tax appeals or the state board of equalization, as applicable.

2. "Court" means the tax court or superior court, whichever is applicable.

3. "Department" means the department of revenue.

4. "Director" means the director of the department.

5. "Electronically send" or "send electronically" means to send by either email or the use of an electronic portal.

6. "Electronic portal" means a secure location on a website established by the department that requires the receiver to enter a password to access.

7. "Email" means:

(a) An electronic transmission of a message to an email address.

(b) If the message contains confidential information, the electronic transmission of a message to an email address using encryption software that requires the receiver to enter a password before the message can be retrieved and viewed.

8. "Internal revenue code" means the United States internal revenue code of 1986, as amended and in effect as of January 1, 2025 2026, including those provisions that became effective during 2024 2025 with the specific adoption of their retroactive effective dates but excluding all changes to the code enacted after January 1, 2025 2026. END_STATUTE

Sec. 10. Section 42-5032.02, Arizona Revised Statutes, is amended to read:

START_STATUTE42-5032.02. Distribution of revenues for city, town or county infrastructure improvements related to manufacturing facilities; definitions

A. Subject to subsection B of this section, from and after September 30, 2013 through September 30, 2033, the state treasurer shall pay in monthly increments a city, town or county up to the amount determined under subsection C of this section for public infrastructure improvements for the benefit of a manufacturing facility.

B. The state treasurer shall not make any payments under subsection C of this section until both of the following apply:

1. Ten percent of the qualifying capital investment that is certified under subsection D of this section and that constitutes construction phase services, as defined in section 42-5075, has been made by the manufacturing facility.

2. From and after June 30, 2014.

C. The total amount paid to a city, town or county under subsection A of this section shall not exceed the total amount of state transaction privilege tax revenues collected under section 42-5010, subsection A from persons conducting business under section 42-5075 derived from contracts to construct buildings and associated improvements for the benefit of a manufacturing facility or eighty seventy-five percent of the total cost of the public infrastructure improvements, whichever is less. The total amount paid to all cities, towns and counties under this subsection shall not exceed a maximum of $200,000,000 the following:

1. Through June 30, 2027, a maximum of $250,000,000

2. Through June 30, 2028, a maximum of $300,000,000.

3. From and after june 30, 2028, a maximum of $350,000,000.

D. Within one hundred eighty days after the commencement of the construction of buildings and associated improvements for the benefit of a manufacturing facility that will require a city, town or county to make infrastructure improvements, the manufacturing facility shall file a sworn certification with the Arizona commerce authority and submit a copy of this sworn certification to the applicable city, town or county that the manufacturing facility agrees to either:

1. Make at least $500,000,000 $3,000,000,000 in capital investment if the manufacturing facility is located in a county that has a population of eight hundred thousand persons or more.

2. Make at least $50,000,000 $100,000,000 in capital investment if the manufacturing facility is located in a county that has a population of less than eight hundred thousand persons.

E. The certification under subsection D of this section shall contain a sworn statement or certification, signed by an officer of the manufacturing facility under penalty of perjury, that the information contained is true and correct according to the best belief and knowledge of the person submitting the information after a reasonable investigation of the facts.

F. Before submitting the certification to the Arizona commerce authority, the manufacturing facility and the city, town or county must enter into a written agreement that:

1. Identifies and states the cost of the public infrastructure improvements that will be constructed.

2. Identifies the sources of monies, including monies received pursuant to this section, that will be used to pay for the public infrastructure improvements.

G. On receipt of the sworn certification from a manufacturing facility pursuant to subsection D of this section, the city, town or county shall enter into a written agreement with the department. This agreement and any amendments or changes to the agreement shall:

1. State the cost of the public infrastructure improvements and separately identify the particular improvements that will be made.

2. State that the monies received under this section will be used exclusively to pay for public infrastructure improvements that are necessary to support the activities of the manufacturing facility.

3. State that the city, town or county will commit all of its portion of the revenue received pursuant to section 42-5029, subsection D derived from contracts subject to section 42-5075 to construct buildings and associated improvements for the benefit of the manufacturing facility for public infrastructure improvements that benefit the manufacturing facility.

4. State that the city, town or county will immediately notify the department when monies received under this section exceed eighty percent of the cost of the infrastructure improvements the applicable percentage of the total cost of the public infrastructure improvements prescribed by subsection C of this section and will return the amount of the excess to the state treasurer for deposit in the state general fund.

5. Stipulate the actual amount of the construction funding that will be derived from sources other than this state.

6. State that the city, town or county will provide at least five percent of the actual amount of the construction funding stipulated to under paragraph 5 of this subsection.

6. 7. Identify the persons who will be prime contractors on the construction of buildings and associated improvements for the benefit of a manufacturing facility and state that each prime contractor has been notified as to which portion of the contractor's income shall be separately identified to the department pursuant to section 42-5075, subsection H.

7. 8. State that the city, town or county agrees that any amounts paid by the department to a prime contractor as identified under paragraph 6 7 of this subsection resulting from an audit adjustment or claim for credit or refund of taxes described in subsection C of this section shall be recovered by the department from the city, town or county by reducing the amount paid to the city, town or county under section 42-5029 from monies designated as distribution base in the month next succeeding the month in which the adjustment or claim is paid.

8. 9. State that the city, town or county agrees that the department will use the amounts subject to any distribution required under subsection A of this section in calculating the maximum amount set by subsection C of this section.

9. 10. State that the city, town or county agrees that if, on notification by the department, the state treasurer ceases payments because of the condition described in subsection H of this section, the city, town or county has no claim to additional payments if the department subsequently pays amounts to a prime contractor identified in an agreement with any city, town or county, as described in paragraph 6 7 of this subsection, due to an audit adjustment or claim for credit or refund of taxes described in subsection C of this section.

11. State that the city, town or county will provide to the department an analysis of the anticipated direct and indirect revenues this state will receive as a result of constructing the manufacturing facility. The analysis must include measures relating to the anticipated new jobs to be directly created by the manufacturing facility, including the total number of new jobs, the range of annual wages per employee and the median annual wages per employee. The department shall retain the analysis and may provide the analysis on request. Information in the analysis that qualifies as a trade secret as defined in section 44-401 or as confidential proprietary information that, if made public, could harm the competitive position of the manufacturing facility is confidential, is not a public record and may not be disclosed by the department.

10. 12. Provide any other information deemed necessary by the department.

H. On notification by the department, the state treasurer shall cease payments under subsection A of this section if either of the following occurs:

1. The city, town or county has received monies that meet or exceed eighty percent the applicable percentage of the total cost of the public infrastructure improvements prescribed by subsection C of this section that are necessary to support the activities related to the manufacturing facility as described in the written agreement pursuant to subsection G of this section.

2. The total amount subject to any distribution required under subsection A of this section has met the maximum amount set by subsection C of this section.

I. Notwithstanding subsection h, paragraph 2 of this section, the department's processing and payment of eligible requests for payment are subject to all of the following:

1. The department may continue to receive and process eligible requests for payment, including partial payments, after the state treasurer has ceased payments pursuant to subsection h, paragraph 2 of this section.

2. Amounts separately accounted for under section 42-5075, subsection H that have not been distributed to the applicable city, town or county shall be retained by the department and remain available for distribution to the applicable city, town or county when the remaining capacity and amounts separately accounted for under section 42-5075, subsection H for the city, town or county are sufficient to process an eligible request for payment, subject to paragraph 6 of this subsection.

3. The department shall process eligible requests for payment during each reporting period in which the department closes and reconciles transaction privilege tax collections under this section. Payment of each eligible request for payment is subject to the availability of amounts separately accounted for under section 42-5075, subsection H for the applicable city, town or county. If the remaining capacity is sufficient to pay all eligible requests for payment on hand, the department shall instruct the state treasurer to pay each request. An eligible request for payment, or any unpaid balance of a partially paid request, that cannot be fully paid during a reporting period remains on hand for processing in subsequent reporting periods, subject to this subsection.

4. If the remaining capacity is insufficient to pay all eligible requests for payment on hand, the department shall allocate the remaining capacity among the eligible requests for payment on a pro rata basis according to the requested amounts. If the pro rata share allocated to a city, town or county exceeds the amounts separately accounted under section 42-5075, subsection H for that city, town or county, the excess remaining capacity shall be reallocated on a pro rata basis among the remaining eligible requests for payment.

5. A city, town or county that has not submitted an eligible request for payment during a reporting period does not reduce the remaining capacity available to cities, towns or counties that have submitted eligible requests for payment during that reporting period.

6. When the remaining capacity is zero and the maximum amount prescribed in subsection c, paragraph 3 of this section has been met, the department shall distribute any amounts retained under paragraph 2 of this subsection to the state general fund and to cities, towns and counties pursuant to the distribution provisions of this chapter that would have applied if the amounts had not been separately accounted for under this section.

J. The department shall post on the department's website the intergovernmental agreements entered into with a city, town or county pursuant to this section and the development agreements entered into in connection with this section. On request by the department, a city, town or county that has entered into an agreement pursuant to Subsection G of this section shall provide the department with a copy of any development agreement between the city, town or county and a manufacturing facility entered into in connection with this section. Before posting a development agreement, the department shall:

1. Provide the manufacturing facility with written notice and a reasonable opportunity to designate, within thirty days after receiving the notice, specific information in the agreement that the manufacturing facility considers to be either:

(a) a trade secret as defined in section 44-401.

(b) confidential proprietary information that, if made public, could harm the competitive position of the manufacturing facility.

2. Redact information designated by the manufacturing facility under paragraph 1 of this subsection before posting the agreement, unless the department determines after consultation with the manufacturing facility that the designation is not reasonable under the circumstances. Information designated and redacted under this paragraph is confidential, is not a public record and may not be disclosed by the department.

I. K. For the purposes of this section:

1. "Associated improvement" includes any public infrastructure improvement that is made for the benefit of the manufacturing facility outside of the parcel or parcels of real property where the manufacturing facility is located.

2. "Capital investment" means an expenditure to acquire, lease or improve property that is used for the benefit of a manufacturing facility, including land, buildings, machinery and fixtures.

3. "Eligible request for payment" means a request for payment submitted by a city, town or county under an agreement entered into pursuant to subsection G of this section that the department has determined complies with the applicable agreement.

3. 4. "Manufacturing facility":

(a) Means an establishment that is engaged in the mechanical, physical or chemical transformation or fabrication of materials, substances or components into new products in this state, that is classified within sections 31 through 33 inclusive of the 2007 edition of the North American industry classification system as published by the national technical information service of the United States department of commerce and that agrees to either:

(i) Make at least $500,000,000 $3,000,000,000 in capital investment if the manufacturing facility is located in a county that has a population of eight hundred thousand persons or more.

(ii) Make at least $50,000,000 $100,000,000 in capital investment if the manufacturing facility is located in a county that has a population of less than eight hundred thousand persons.

(b) Does not include mining, milling or smelting mineral ore or generating electricity.

4. 5. "Population" means the population determined in the most recent United States decennial census or the most recent special census as provided in section 28-6532.

5. 6. "Public infrastructure" means water production, delivery and disposal facilities, wastewater production, reclamation, recycling, treatment, storage, delivery and disposal facilities and roads that are necessary to support the activities of the manufacturing facility.

7. "Remaining capacity" means the amount by which the applicable maximum amount prescribed in subsection C of this section exceeds the total amount distributed to all cities, towns and counties under subsection A of this section. END_STATUTE

Sec. 11. Section 42-11111, Arizona Revised Statutes, is amended to read:

START_STATUTE42-11111. Exemption for property; widows and widowers; persons with a total and permanent disability; veterans with a disability; definitions

A. The property of widows and widowers, of persons with total and permanent disabilities and of veterans with service or nonservice connected disabilities who are residents of this state is exempt from taxation as provided by article IX, section 2, Constitution of Arizona, and subject to the conditions and limits prescribed by this section.

B. Pursuant to article IX, section 2, subsection F, Constitution of Arizona, the exemptions from taxation under this section are allowed as provided in subsections C, D, and E, f and g of this section.

C. The primary residence of a veteran with a service-connected disability whose disability rating by the United States department of veterans affairs is one hundred percent or whose disability status is total disability based on individual unemployability is fully exempt from taxation. The surviving spouse of a veteran whose primary residence is receiving the exemption under this subsection may continue to claim the full exemption for the surviving spouse's primary residence as long as the surviving spouse does not remarry. For the purposes of this subsection, a primary residence that is owned by a veteran who is eligible for the exemption under this subsection and the veteran's spouse shall be treated as if owned solely by the veteran.

D. The property of a veteran with a nonservice-connected disability whose disability rating by the United States department of veterans affairs is one hundred percent or less or with a service-connected disability whose disability rating by the United States department of veterans affairs is less than one hundred percent is exempt in the amount of $4,188. The limit under this subsection is further limited by multiplying the total exemption amount by the percentage of the veteran's disability, as rated by the United States department of veterans affairs.

E. Except as provided in subsection F or G of this section, the property of a widow or widower or a person with a total and permanent disability whose income from all sources does not exceed the limits prescribed by subsection J of this section is exempt in the amount of:

1. $4,188 if the person's total assessment does not exceed the amount provided in paragraph 2 of this subsection.

2. No exemption if the person's total assessment exceeds $28,459.

F. The primary residence of a widow or widower who is the surviving spouse of a veteran who was eligible for the exemption under subsection C of this section is fully exempt from taxation.

G. The primary residence of a widow or widower who is the surviving spouse of a veteran who was eligible for the exemption under subsection D of this section is exempt in the amount of $4,188. The limit under this subsection is further limited by multiplying the total exemption amount by the percentage of that veteran's disability, as rated by the United States department of veterans affairs.

F. H. On or before December 31 of each year, the department shall increase the following amounts:

1. The total allowable exemption amount under subsection D, and subsection E, paragraph 1 and subsection G of this section based on the average annual percentage increase, if any, in the GDP price deflator in the two most recent complete state fiscal years.

2. Beginning in tax year 2026, the total assessment limit amount under subsection E, paragraph 2 of this section based on the average annual percentage increase, if any, in the federal house price index for the two most recent complete state fiscal years.

3. The total income limit amounts under subsection H J, paragraphs 1 and 2 of this section based on the average annual percentage increase, if any, in the GDP price deflator in the two most recent complete state fiscal years.

G. I. For the purpose of determining the amount of the allowable exemption pursuant to subsection E of this section, the person's total assessment shall not include the value of any vehicle that is taxed under title 28, chapter 16, article 3.

H. J. Pursuant to article IX, section 2, subsection F, Constitution of Arizona, to qualify for an the exemption under prescribed in subsection E of this section, the total income from all sources of the claimant and the claimant's spouse and the income from all sources of all of the claimant's children who resided with the claimant in the claimant's residence in the year immediately preceding the year for which the claimant applies for the exemption shall not exceed:

1. $34,901 if none of the claimant's children under eighteen years of age resided with the claimant in the claimant's residence.

2. $41,870 if one or more of the claimant's children residing with the claimant in the claimant's residence either:

(a) Were under eighteen years of age.

(b) Had a total and permanent physical or mental disability, as certified by competent medical authority as provided by law.

I. For the purposes of subsection H of this section, "income from all sources" means the sum of the following, excluding the items listed in subsection J of this section:

1. Adjusted gross income as defined by the department.

2. The amount of capital gains excluded from adjusted gross income.

3. Nontaxable strike benefits.

4. Nontaxable interest that is received from the federal government or any of its instrumentalities.

5. Payments that are received from a retirement program and paid by:

(a) This state or any of its political subdivisions.

(b) The United States through any of its agencies, instrumentalities or programs, except as provided in subsection J of this section.

6. The gross amount of any pension or annuity that is not otherwise exempted.

J. Notwithstanding subsection I of this section, income from all sources does not include monies received from:

1. Cash public assistance and relief.

2. Railroad retirement benefits.

3. Payments under the federal social security act (49 Stat. 620).

4. Payments under the unemployment insurance laws of this state.

5. Payments from any veterans pensions.

6. Workers' compensation payments.

7. Loss of time insurance.

8. Gifts from nongovernmental sources, surplus foods or other relief in kind supplied by a governmental agency.

K. A widow or widower, a person with a total and permanent disability or a veteran with a disability person shall establish eligibility for exemption under this section by filing an affidavit with the county assessor under section 42-11152 when initially claiming the exemption and, if claiming the exemption under subsection F or G of this section, providing evidence of the veteran spouse's disability rating by the United States department of veterans affairs or total disability based on individual unemployability to the county assessor. Each year thereafter, the person who claims the exemption prescribed in subsection E of this section or the person's representative shall annually calculate income from the preceding year to ensure that the person still qualifies for the exemption. and The person or the person's representative shall notify the county assessor in writing of any disqualifying event that disqualifies the person from further exemption. Regardless of whether the person or the person's representative notifies the county assessor as required by this subsection, the property is subject to tax as provided by law from the date of disqualification the disqualifying event, including interest, penalties and proceedings for tax delinquencies. Disqualifying events include A disqualifying event includes:

1. Except as provided in subsection C of this section, The person's death.

2. The remarriage of a widow or widower.

3. for the exemption prescribed in subsection E of this section, the person's income from all sources exceeding the limits prescribed by subsection H J of this section.

4. The conveyance of title to the property to another owner.

L. in order for a subsequent primary residence of a person who claims any of the exemptions prescribed by this section to be eligible for exemption, within sixty days after the subsequent primary residence becomes the person's primary residence the person must file with the county assessor of the county in which the subsequent primary residence is located a fully completed exemption transfer form as prescribed by the department.

L. M. Any dollar amount of exemption that is unused in a tax year against the limited property value of property and improvements owned by the individual may be applied for the tax year against the value of personal property subject to special property taxes, including the taxes collected pursuant to title 5, chapter 3, article 3 and title 28, chapter 16, article 3.

M. N. The property tax exemptions provided prescribed in subsections C, D, and E, F and g of this section are exclusive from each other, and an individual is not entitled to property tax exemptions under more than one category as a widow or widower, a person with a total and permanent disability or a veteran with a disability subsection even if the individual is eligible for an exemption in more than one category subsection.

N. O. For the purposes of this section:

1. "Competent medical authority" means any of the following:

(a) An individual licensed under title 32, chapter 8, 13, 14, 17, 19.1, 25 or 29 or a comparable law of another state.

(b) A registered nurse practitioner as defined in section 32-1601.

2. "Federal house price index" means the average measure of movement of single-family house prices in the United States published by the federal housing finance agency, or its successor, for this state.

3. "GDP price deflator" means the average of the four implicit price deflators for the gross domestic product reported by the United States department of commerce or its successor for the four quarters of the state fiscal year.

4. "Income from all sources":

(a) means the sum of the following:

(i) Adjusted gross income as defined by the department.

(ii) The amount of capital gains excluded from adjusted gross income.

(iii) Nontaxable strike benefits.

(iv) Nontaxable interest that is received from the federal government or any of its instrumentalities.

(v) Payments that are received from a retirement program and paid by this state or any political subdivision of this state or the United States through any of its agencies, instrumentalities or programs, except as provided in subdivision (b) of this paragraph.

(vi) The gross amount of any pension or annuity that is not otherwise exempted.

(b) Does not include monies received from:

(i) Cash public assistance and relief.

(ii) Railroad retirement benefits.

(iii) Payments under the federal social security act (49 Stat. 620).

(iv) Payments under the unemployment insurance laws of this state.

(v) Payments from any veterans pensions.

(vi) Workers' compensation payments.

(vii) Loss of time insurance.

(viii) Gifts from nongovernmental sources, surplus foods or other relief in kind supplied by a governmental agency.

(iv) Veterans disability PAYMENTS due to the disability rating or status of total disability based on individual unemployability.

4. 5. "Person with a total and permanent disability" means a person who is unable to engage in any substantial gainful activity, for pay or profit, by reason of any physical or mental impairment that is expected to last for a continuous period of at least twelve months or result in death within twelve months as certified by a competent medical authority.

5. 6. "Veteran" means an individual who has served in, and been discharged, separated or released under honorable conditions from, active or inactive service in the uniformed services of the United States, including:

(a) All regular, reserve and national guard components of the United States army, navy, air force, marine corps and coast guard.

(b) The commissioned corps of the national oceanic and atmospheric administration.

(d) A nurse in the service of the American red cross or in the army and navy nurse corps.

(e) Any other civilian service that is authorized by federal law to be considered active military duty for the purpose of laws administered by the United States secretary of veterans affairs. END_STATUTE

Sec. 12. Section 43-105, Arizona Revised Statutes, is amended to read:

START_STATUTE43-105. Internal revenue code; definition; application

A. For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2025, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2026, including those provisions that became effective during 2025 with the specific adoption of all retroactive effective dates, but excluding any changes to the code enacted after January 1, 2026.

A. B. For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2024 through December 31, 2025, "internal revenue code" means the United States internal revenue code 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 and including those provisions of public law 119-21 that are retroactively effective during taxable years beginning from and after December 31, 2024 through December 31, 2025.

B. C. For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2023 through December 31, 2024, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2024, including those provisions that became effective during 2023 with the specific adoption of all retroactive effective dates, and including those provisions of public law 119-21 that are retroactively effective during taxable years beginning from and after December 31, 2023 through December 31, 2024.

C. D. For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2022 through December 31, 2023, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2023, including those provisions that became effective during 2022 with the specific adoption of all retroactive effective dates, and including those provisions of public law 119-21 that are retroactively effective during taxable years beginning from and after December 31, 2022 through December 31, 2023.

D. E. For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2021 through December 31, 2022, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2022, including those provisions that became effective during 2021 with the specific adoption of all retroactive effective dates, and including those provisions of the chips and science act of 2022 (P.L. 117-167), the inflation reduction act of 2022 (P.L. 117-169), and the consolidated appropriations act, 2023 (P.L. 117-328) and public law 119-21 that are retroactively effective during taxable years beginning from and after December 31, 2021 through December 31, 2022.

E. F. For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2020 through December 31, 2021, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on March 11, 2021, including those provisions that became effective during 2020 with the specific adoption of all retroactive effective dates and including those provisions of the PPP extension act of 2021 (P.L. 117-6) and the infrastructure investment and jobs act (P.L. 117-58) that are retroactively effective during taxable years beginning from and after December 31, 2020 through December 31, 2021.

F. G. For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2019 through December 31, 2020, "internal revenue code" means the United States internal revenue code 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, and 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), the consolidated appropriations act, 2021 (P.L. 116-260) and the American rescue plan act of 2021 (P.L. 117-2) that are retroactively effective during taxable years beginning from and after December 31, 2019 through December 31, 2020.

G. H. For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2018 through December 31, 2019, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2019, including those provisions that became effective during 2018 with the specific adoption of all retroactive effective dates, and including those provisions of the taxpayer first act (P.L. 116-25), the further consolidated appropriations act, 2020 (P.L. 116-94), 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 during taxable years beginning from and after December 31, 2018 through December 31, 2019.

H. I. For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2017 through December 31, 2018, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2018, including those provisions that became effective during 2017 with the specific adoption of all retroactive effective dates, and including those provisions of the bipartisan budget act of 2018 (P.L. 115-123), the consolidated appropriations act, 2018 (P.L. 115-141), the further consolidated appropriations act, 2020 (P.L. 116-94), 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 during taxable years beginning from and after December 31, 2017 through December 31, 2018.

I. J. For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2016 through December 31, 2017, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2017, including those provisions that became effective during 2016 with the specific adoption of all federal retroactive effective dates, and including those provisions of the disaster tax relief and airport and airway extension act of 2017 (P.L. 115-63), the tax cuts and jobs act (P.L. 115-97), the bipartisan budget act of 2018 (P.L. 115-123), the consolidated appropriations act, 2018 (P.L. 115-141), the further consolidated appropriations act, 2020 (P.L. 116-94) and the coronavirus aid, relief, and economic security act (P.L. 116-136) that are retroactively effective during taxable years beginning from and after December 31, 2016 through December 31, 2017.

J. K. For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2015 through December 31, 2016, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2016, including those provisions that became effective during 2015 with the specific adoption of all federal retroactive effective dates, and including those provisions of the United States appreciation for olympians and paralympians act of 2016 (P.L. 114-239), the tax cuts and jobs act (P.L. 115-97), the consolidated appropriations act, 2018 (P.L. 115-141), the further consolidated appropriations act, 2020 (P.L. 116-94) and the coronavirus aid, relief, and economic security act (P.L. 116-136) that are retroactively effective during taxable years beginning from and after December 31, 2015 through December 31, 2016.

K. For the purposes of computing income tax pursuant to this title, for taxable years beginning from and after December 31, 2014 through December 31, 2015, "internal revenue code" means the United States internal revenue code of 1986, as amended, in effect on January 1, 2015, including those provisions that became effective during 2014 with the specific adoption of all federal retroactive effective dates, and including those provisions of the slain officer family support act of 2015 (P.L. 114-7), the don't tax our fallen public safety heroes act (P.L. 114-14), the surface transportation and veterans health care choice improvement act of 2015 (P.L. 114-41), the consolidated appropriations act, 2016 (P.L. 114-113), the consolidated appropriations act, 2018 (P.L. 115-141) and the coronavirus aid, relief, and economic security act (P.L. 116-136) that are retroactively effective during taxable years beginning from and after December 31, 2014 through December 31, 2015.END_STATUTE

Sec. 13. Section 43-222, Arizona Revised Statutes, is amended to read:

START_STATUTE43-222. Income tax credit review schedule

The joint legislative income tax credit review committee shall review the following income tax credits:

1. For years ending in 0 and 5, sections 43-1079.01, 43-1088, 43-1089.04, 43-1167.01 and 43-1175.

2. For years ending in 1 and 6, sections 43-1072.02, 43-1074.02, 43-1075, 43-1076.01, 43-1077, 43-1078, 43-1083, 43-1083.02, 43-1162, 43-1164.03 and 43-1183.

3. For years ending in 2 and 7, sections 43-1073, 43-1082, 43-1085, 43-1086, 43-1089, 43-1089.01, 43-1089.02, 43-1089.03, 43-1164, 43-1165, and 43-1181.

4. For years ending in 3 and 8, sections 43-1074.01, 43-1168, 43-1170 and 43-1178.

5. For years ending in 4 and 9, sections 43-1073.01, 43-1081.01, 43-1083.03, 43-1084, 43-1164.04, 43-1164.05 and 43-1184. END_STATUTE

Sec. 14. Section 43-1021, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1021. Addition to Arizona gross income

In computing Arizona adjusted gross income, the following amounts shall be added to Arizona gross income:

1. A beneficiary's share of the fiduciary adjustment to the extent that the amount determined by section 43-1333 increases the beneficiary's Arizona gross income.

2. An amount equal to the ordinary income portion of a lump sum distribution that was excluded from federal adjusted gross income pursuant to the special rule for individuals who attained fifty years of age before January 1, 1986 under Public Law 99-514, section 1122(h)(3).

3. The amount of interest income received on obligations of any state, territory or possession of the United States, or any political subdivision thereof, located outside of this state, reduced, for taxable years beginning from and after December 31, 1996, by the amount of any interest on indebtedness and other related expenses that were incurred or continued to purchase or carry those obligations and that are not otherwise deducted or subtracted in arriving at Arizona gross income.

4. The excess of a partner's share of partnership taxable income required to be included under chapter 14, article 2 of this title over the income required to be reported under section 702(a)(8) of the internal revenue code.

5. The excess of a partner's share of partnership losses determined pursuant to section 702(a)(8) of the internal revenue code over the losses allowable under chapter 14, article 2 of this title.

6. Any amount of agricultural water conservation expenses that were deducted pursuant to the internal revenue code for which a credit is claimed under section 43-1084.

7. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under section 43-1081.01 or that is pollution control equipment for which a credit was taken before taxable year 2022 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.

8. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43-1074.02 or 43-1081.01 or that is pollution control equipment for which a credit was taken before taxable year 2022 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43-1074.02 or 43-1081.01 or for pollution control equipment, the section in which the credit was taken, as applicable.

9. The deduction referred to in section 1341(a)(4) of the internal revenue code for restoration of a substantial amount held under a claim of right.

10. The amount by which a net operating loss carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds the net operating loss carryover or capital loss carryover allowable pursuant to section 43-1029, subsection F.

11. The amount of any depreciation allowance allowed pursuant to section 167(a) of the internal revenue code to the extent not previously added.

12. The amount of a nonqualified withdrawal, as defined in section 15-1871, from a college savings plan established pursuant to section 529 of the internal revenue code that is made to a distributee to the extent the amount is not included in computing federal adjusted gross income, except that the amount added under this paragraph shall not exceed the difference between the amount subtracted under section 43-1022 in prior taxable years and the amount added under this section in any prior taxable years.

13. If a subtraction is or has been taken by the taxpayer under section 43-1024, in the current or a prior taxable year for the full amount of eligible access expenditures paid or incurred to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, article 8, any amount of eligible access expenditures that is recognized under the internal revenue code, including any amount that is amortized according to federal amortization schedules, and that is included in computing taxable income for the current taxable year.

14. For taxable years beginning from and after December 31, 2017, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph:

(a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues.

(b) "Specie" means coins having precious metal content.

15. For taxable years beginning from and after December 31, 2021, the amount deducted by the partnership or S corporation pursuant to the internal revenue code for the amount paid to this state under section 43-1014 and for taxes that the department determines are substantially similar to the tax imposed under section 43-1014. This amount shall be reflected in the partner's or shareholder's Arizona gross income and the partnership's or S corporation's Arizona taxable income.

16. The amount of any motion picture production costs that was deducted pursuant to the internal revenue code for which a tax credit is claimed under section 43-1082.

17. for taxable years beginning from and after December 31, 2025, the amount of the special depreciation allowance for qualified production property allowed pursuant to section 168(n) of the internal revenue code for the taxable year to the extent not previously added. END_STATUTE

Sec. 15. Section 43-1022, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1022. Subtractions from Arizona gross income

In computing Arizona adjusted gross income, the following amounts shall be subtracted from Arizona gross income:

1. The amount of exemptions allowed by section 43-1023.

2. Benefits, annuities and pensions in an amount totaling not more than $2,500 received from one or more of the following:

(a) The United States government service retirement and disability fund, the United States foreign service retirement and disability system and any other retirement system or plan established by federal law, except retired or retainer pay of the uniformed services of the United States that qualifies for a subtraction under paragraph 26 of this section.

(b) The Arizona state retirement system, the corrections officer retirement plan, the public safety personnel retirement system, the elected officials' retirement plan, an optional retirement program established by the Arizona board of regents under section 15-1628, an optional retirement program established by a community college district board under section 15-1451 or a retirement plan established for employees of a county, city or town in this state.

3. A beneficiary's share of the fiduciary adjustment to the extent that the amount determined by section 43-1333 decreases the beneficiary's Arizona gross income.

4. Interest income received on obligations of the United States, minus any interest on indebtedness, or other related expenses, and deducted in arriving at Arizona gross income, that were incurred or continued to purchase or carry such obligations.

5. The excess of a partner's share of income required to be included under section 702(a)(8) of the internal revenue code over the income required to be included under chapter 14, article 2 of this title.

6. The excess of a partner's share of partnership losses determined pursuant to chapter 14, article 2 of this title over the losses allowable under section 702(a)(8) of the internal revenue code.

7. The amount allowed by section 43-1025 for contributions during the taxable year of agricultural crops to charitable organizations.

8. The portion of any wages or salaries paid or incurred by the taxpayer for the taxable year that is equal to the amount of the federal work opportunity credit, the empowerment zone employment credit, the credit for employer paid social security taxes on employee cash tips and the Indian employment credit that the taxpayer received under sections 45A, 45B, 51(a) and 1396 of the internal revenue code.

9. The amount of exploration expenses that is determined pursuant to section 617 of the internal revenue code, that has been deferred in a taxable year ending before January 1, 1990 and for which a subtraction has not previously been made. The subtraction shall be made on a ratable basis as the units of produced ores or minerals discovered or explored as a result of this exploration are sold.

10. The amount included in federal adjusted gross income pursuant to section 86 of the internal revenue code, relating to taxation of social security and railroad retirement benefits.

11. To the extent not already excluded from Arizona gross income under the internal revenue code, compensation received for active service as a member of the reserves, the national guard or the armed forces of the United States, including compensation for service in a combat zone as determined under section 112 of the internal revenue code.

12. The amount of unreimbursed medical and hospital costs, adoption counseling, legal and agency fees and other nonrecurring costs of adoption. The subtraction under this paragraph may be taken for the costs that are described in this paragraph and that are incurred in prior years, but the subtraction may be taken only in the year during which the final adoption order is granted. The amount subtracted may not exceed:

(a) In taxable years beginning before December 31, 2025, $3,000. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife may not exceed $3,000.

(b) In taxable years beginning from and after December 31, 2025, $5,000 for a single individual or head of household.

(c) For taxable years beginning from and after December 31, 2025, $10,000 for a married couple filing a joint return. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife may not exceed $10,000.

13. The amount authorized by section 43-1027 for the taxable year relating to qualified wood stoves, wood fireplaces or gas fired fireplaces.

14. The amount by which a net operating loss carryover or capital loss carryover allowable pursuant to section 43-1029, subsection F exceeds the net operating loss carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code.

15. Any amount of qualified educational expenses that is distributed from a qualified state tuition program determined pursuant to section 529 of the internal revenue code and that is included in income in computing federal adjusted gross income.

16. Any item of income resulting from an installment sale that has been properly subjected to income tax in another state in a previous taxable year and that is included in Arizona gross income in the current taxable year.

17. For property placed in service:

(a) In taxable years beginning before December 31, 2012, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year computed as if the election described in section 168(k) of the internal revenue code had been made for each applicable class of property in the year the property was placed in service.

(b) In taxable years beginning from and after December 31, 2012 through December 31, 2013, an amount determined in the year the asset was placed in service based on the calculation in subdivision (a) of this paragraph. In the first taxable year beginning from and after December 31, 2013, the taxpayer may elect to subtract the amount necessary to make the depreciation claimed to date for the purposes of this title the same as it would have been if subdivision (c) of this paragraph had applied for the entire time the asset was in service. Subdivision (c) of this paragraph applies for the remainder of the asset's life. If the taxpayer does not make the election under this subdivision, subdivision (a) of this paragraph applies for the remainder of the asset's life.

(c) In taxable years beginning from and after December 31, 2013 through December 31, 2015, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year as computed as if the additional allowance for depreciation had been ten percent of the amount allowed pursuant to section 168(k) of the internal revenue code.

(d) In taxable years beginning from and after December 31, 2015 through December 31, 2016, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year as computed as if the additional allowance for depreciation had been fifty-five percent of the amount allowed pursuant to section 168(k) of the internal revenue code.

(e) In taxable years beginning from and after December 31, 2016, an amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year as computed as if the additional allowance for depreciation had been the full amount allowed pursuant to section 168(k) of the internal revenue code.

18. With respect to property that is sold or otherwise disposed of during the taxable year by a taxpayer that complied with section 43-1021, paragraph 11 with respect to that property, the amount of depreciation that has been allowed pursuant to section 167(a) of the internal revenue code to the extent that the amount has not already reduced Arizona taxable income in the current or prior taxable years.

19. The amount contributed during the taxable year to college savings plans established pursuant to section 529 of the internal revenue code on behalf of the designated beneficiary to the extent that the contributions were not deducted in computing federal adjusted gross income. The amount subtracted may not exceed:

(a) $2,000 per beneficiary for a single individual or a head of household.

(b) $4,000 per beneficiary for a married couple filing a joint return. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife may not exceed $4,000 per beneficiary.

20. The portion of the net operating loss carryforward that would have been allowed as a deduction in the current year pursuant to section 172 of the internal revenue code if the election described in section 172(b)(1)(H) of the internal revenue code had not been made in the year of the loss that exceeds the actual net operating loss carryforward that was deducted in arriving at federal adjusted gross income. This subtraction only applies to taxpayers who made an election under section 172(b)(1)(H) of the internal revenue code as amended by section 1211 of the American recovery and reinvestment act of 2009 (P.L. 111-5) or as amended by section 13 of the worker, homeownership, and business assistance act of 2009 (P.L. 111-92).

21. For taxable years beginning from and after December 31, 2013, the amount of any net capital gain included in federal adjusted gross income for the taxable year derived from investment in a qualified small business as determined by the Arizona commerce authority pursuant to section 41-1518.

22. An amount of any net long-term capital gain included in federal adjusted gross income for the taxable year that is derived from an investment in an asset acquired after December 31, 2011, as follows:

(a) For taxable years beginning from and after December 31, 2012 through December 31, 2013, ten percent of the net long-term capital gain included in federal adjusted gross income.

(b) For taxable years beginning from and after December 31, 2013 through December 31, 2014, twenty percent of the net long-term capital gain included in federal adjusted gross income.

(c) For taxable years beginning from and after December 31, 2014, twenty-five percent of the net long-term capital gain included in federal adjusted gross income. For the purposes of this paragraph, a transferee that receives an asset by gift or at the death of a transferor is considered to have acquired the asset when the asset was acquired by the transferor. If the date an asset is acquired cannot be verified, a subtraction under this paragraph is not allowed.

23. If an individual is not claiming itemized deductions pursuant to section 43-1042, the amount of premium costs for long-term care insurance, as defined in section 20-1691.

24. The amount of eligible access expenditures paid or incurred during the taxable year to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, article 8 as provided by section 43-1024.

25. For taxable years beginning from and after December 31, 2017, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph:

(a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues.

(b) "Specie" means coins having precious metal content.

26. Benefits, annuities and pensions received as retired or retainer pay of the uniformed services of the United States in amounts as follows:

(a) For taxable years through December 31, 2018, an amount totaling not more than $2,500.

(b) For taxable years beginning from and after December 31, 2018 through December 31, 2020, an amount totaling not more than $3,500.

27. For taxable years beginning from and after December 31, 2020, the amount contributed during the taxable year to an achieving a better life experience account established pursuant to section 529A of the internal revenue code on behalf of the designated beneficiary to the extent that the contributions were not deducted in computing federal adjusted gross income. The amount subtracted may not exceed:

(a) $2,000 per beneficiary for a single individual or a head of household.

28. For taxable years beginning from and after December 31, 2020, Arizona small business gross income but only if an individual taxpayer has elected to separately report and pay tax on the taxpayer's Arizona small business adjusted gross income on the Arizona small business income tax return.

29. To the extent not already excluded from Arizona gross income under the internal revenue code, the value of virtual currency and non-fungible tokens the taxpayer received pursuant to an airdrop at the time of the airdrop. This paragraph may not be interpreted as providing a subtraction for any appreciation in value that occurs from holding the virtual currency after the initial receipt of the airdrop. For the purposes of this paragraph:

(a) "Airdrop" means the receipt of virtual currency through a means of distribution of virtual currency to the distributed ledger addresses of multiple taxpayers.

(b) "Non-fungible token" has the same meaning prescribed in section 43-1028.

30. The amount allowed as a subtraction by section 43-1028 for gas fees not already included in the taxpayer's virtual currency or non-fungible token basis.

31. for taxable years beginning from and after december 31, 2024, To the extent not already excluded from Arizona gross income under the internal revenue code, the amount of qualified tips received during the taxable year that is deducted under section 224 of the internal revenue code.

32. for taxable years beginning from and after december 31, 2024, To the extent not already excluded from Arizona gross income under the internal revenue code, the amount of qualified overtime compensation received during the taxable year that is deducted under section 225 of the internal revenue code.

33. For taxable years beginning from and after December 31, 2025, to the extent not already excluded from Arizona gross income under the internal revenue code, the amount of a distribution from an account established pursuant to section 530A of the internal revenue code.

34. for taxable years beginning from and after december 31, 2025, To the extent not already excluded from Arizona gross income under the internal revenue code, the amount of child and dependent care expenses for a qualifying individual under section 21 of the internal revenue code paid or incurred by the taxpayer for the taxable year that exceeds the amount of the federal credit that the taxpayer received under section 21 of the internal revenue code.

35. For taxable years beginning from and after December 31, 2024, to the extent not already excluded from Arizona gross income under the internal revenue code, the amount deducted for a qualified individual under section 151(d)(5)(C) of the internal revenue code.

36. For taxable years beginning from and after December 31, 2024 through December 31, 2025, to the extent not already excluded from Arizona gross income under the internal revenue code, the amount deducted for qualified passenger vehicle loan interest under section 163(h)(4) of the internal revenue code. END_STATUTE

Sec. 16. Section 43-1041, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1041. Optional standard deduction

A. A taxpayer may elect to take a standard deduction as follows:

1. In the case of a single person or a married person filing separately, the standard deduction is $12,200 $15,750, subject to subsection H of this section.

2. In the case of a single person who is a head of a household, the standard deduction is $18,350 $23,625, subject to subsection H of this section.

3. In the case of a married couple filing a joint return, the standard deduction is $24,400 $31,500, subject to subsection H of this section.

B. The standard deduction provided for in subsection A of this section is in lieu of all itemized deductions allowed by section 43-1042, which are to be subtracted from Arizona adjusted gross income in computing taxable income.

C. The standard deduction is allowed if the taxpayer so elects. The election is made by the taxpayer claiming on the tax return the amount provided for in this section in lieu of the itemized deductions allowed under section 43-1042. Electing to file a short form return or a simplified return that does not allow itemized deductions to be claimed is considered to be an election to claim the standard deduction.

D. In the case of a husband and wife, the standard deduction provided for in subsection A of this section is not allowed to either if the taxable income of one of the spouses is determined without regard to the standard deduction.

E. The standard deduction provided for by subsection A of this section is not allowed in the case of a taxable year of less than twelve months on account of a change in the accounting period.

F. Except as provided in subsection G of this section, a change of an election to take, or not to take, the standard deduction for any taxable year may be made after the filing of the return for that year.

G. A taxpayer is not allowed to change an election to take, or not to take, the standard deduction if:

1. The spouse of the taxpayer filed a separate return for any taxable year corresponding, for the purposes of subsection D of this section, to the taxable year of the taxpayer unless both of the following apply:

(a) The spouse makes a change of election with respect to the standard deduction for the taxable year covered in the separate return consistent with the change of election sought by the taxpayer.

(b) The taxpayer and spouse consent in writing to the assessment, within such a period as may be agreed on with the department, of any deficiency, to the extent attributable to the change of election, even though at the time of filing the consent the assessment of the deficiency would otherwise be prevented by the operation of any law or rule of law.

2. The tax liability of the taxpayer or the taxpayer's spouse for the taxable year has been compromised.

H. For each taxable year beginning from and after December 31, 2019, the department shall adjust the dollar amounts prescribed by subsection A, paragraphs 1, 2 and 3 of this section for inflation in the same manner in which the federal basic standard deduction is adjusted for inflation pursuant to section 63 of the internal revenue code.

I. For taxable years beginning from and after December 31, 2018, The standard deduction allowed under subsection A of this section shall be increased as follows:

1. For taxable years beginning from and after December 31, 2018 through December 31, 2025, by the amount equal to twenty-five percent of the total amount of a taxpayer's charitable deductions that would have been allowed if the taxpayer elected to claim itemized deductions under section 43-1042 rather than elect the standard deduction. For taxable years beginning from and after December 31, 2021 through December 31, 2025, the department shall adjust the percentage prescribed in this subsection paragraph according to the average annual change in the metropolitan Phoenix consumer price index published by the United States department of labor, bureau of labor statistics, except that the adjusted percentage may not exceed one hundred percent. The revised percentage shall be raised to the nearest whole percent and may not be revised below the amounts prescribed in the prior taxable year.

2. For taxable years beginning from and after December 31, 2025, by an amount equal to the total amount of a taxpayer's charitable contributions as defined in section 170(c) of the internal revenue code. The increase allowed by this paragraph may not exceed:

(a) In the case of a single person or a married person filing separately, $1,000.

(b) In the case of a married couple filing a joint return, $2,000. END_STATUTE

Sec. 17. Section 43-1042, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1042. Itemized deductions

A. Except as provided by subsections B, and C and D of this section, at the election of the taxpayer, and in lieu of the standard deduction allowed by section 43-1041, in computing taxable income the taxpayer may take the amount of itemized deductions allowable for the taxable year pursuant to subtitle A, chapter 1, subchapter B, parts VI and VII, but subject to the limitations limits prescribed by sections 67, 68 and 274 of the internal revenue code.

B. In lieu of the amount of the federal itemized deduction for expenses paid for medical care allowed under section 213 of the internal revenue code, the taxpayer may deduct the full amount of such expenses.

C. A taxpayer shall not claim both a deduction provided by this section and a credit allowed by this title with respect to the same charitable contributions. This subsection applies to any contribution for which a credit is allowed by this title even if the contribution is treated as a payment of state income tax.

D. for taxable years beginning from and after december 31, 2025, In lieu of the amount of the federal itemized deduction for state and local taxes allowed under section 164(b)(7) of the internal revenue code, the taxpayer may deduct up to $10,000 of that amount for such state and local taxes.

D. E. The taxpayer may add any interest expense paid by the taxpayer for the taxable year that is equal to the amount of federal credit for interest on certain home mortgages allowed by section 25 of the internal revenue code. END_STATUTE

Sec. 18. Section 43-1073.01, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1073.01. Dependent tax credit

A. A credit is allowed against the taxes imposed by this title for a taxable year for each dependent of a taxpayer as provided by this section.

B. For taxpayers whose federal adjusted gross income is less than $200,000 for a taxpayer who is a single person, a married person filing separately or a head of household or is less than $400,000 for a married couple filing a joint return, the amount of the credit is:

1. $100 $125 for each dependent who is under seventeen years of age at the end of the taxable year.

2. $25 for each dependent who is at least seventeen years of age at the end of the taxable year.

C. For taxpayers whose federal adjusted gross income is $200,000 or more for a taxpayer who is a single person, a married person filing separately or a head of household or is $400,000 or more for a married couple filing a joint return, the amount of the credit is:

1. $100 $125 minus five percent for each $1,000, or fraction thereof, by which the taxpayer's federal adjusted gross income exceeds the applicable threshold provided in this subsection for each dependent who is under seventeen years of age at the end of the taxable year.

2. $25 minus five percent for each $1,000, or fraction thereof, by which the taxpayer's federal adjusted gross income exceeds the applicable threshold provided in this subsection for each dependent who is at least seventeen years of age at the end of the taxable year.

D. In the case of a nonresident or part-year resident taxpayer, the credit allowed under this section is allowed in the percentage that the taxpayer's Arizona gross income is of the federal adjusted gross income. END_STATUTE

Sec. 19. Repeal

Section 43-1074, Arizona Revised Statutes, is repealed.

Sec. 20. Section 43-1074.01, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1074.01. Credit for increased research activities

A. A credit is allowed against the taxes imposed by this title in an amount determined pursuant to section 41 of the internal revenue code, except that:

1. The amount of the credit is based on the excess, if any, of the qualified research expenses for the taxable year over the base amount as defined in section 41(c) of the internal revenue code and is computed as follows:

(a) If the excess is $2,500,000 or less:

(i) For taxable years beginning before December 31, 2030, the credit is equal to twenty-four percent of that amount.

(ii) For taxable years beginning from and after December 31, 2030, the credit is equal to twenty percent of that amount.

(b) If the excess is over $2,500,000:

(i) For taxable years beginning before December 31, 2030, the credit is equal to $600,000 plus fifteen percent of any amount exceeding $2,500,000.

(ii) For taxable years beginning from and after December 31, 2030, the credit is equal to $500,000 plus eleven percent of any amount exceeding $2,500,000.

(c) For taxable years beginning from and after December 31, 2011, an additional credit amount is allowed if the taxpayer made basic research payments during the taxable year to a university under the jurisdiction of the Arizona board of regents. The additional credit amount is equal to ten percent of the excess, if any, of the basic research payments over the qualified organization base period amount for the taxable year. The department shall not allow credit amounts under this subdivision and section 43-1168, subsection A, paragraph 1, subdivision (d) that exceed, in the aggregate, a combined total of $10,000,000 in any calendar year. Subject to that limit, on application by the taxpayer, the department shall certify credit amounts under this subdivision and section 43-1168, subsection A, paragraph 1, subdivision (d) based on priority placement established by the date that the taxpayer filed the application. For taxable years beginning from and after December 31, 2014, any basic research payments used to determine the additional credit under this subdivision must first receive certification from the Arizona commerce authority pursuant to section 41-1507.01. The additional credit amount under this subdivision shall not exceed the amount allowed based on actual basic research payments or the department's certification, whichever is less. If an application, if certified in full, would exceed the $10,000,000 limit, the department shall certify only an amount within that limit. After the limit is attained, the department shall deny any subsequent applications regardless of whether other certified amounts are not actually claimed as a credit or other taxpayers fail to qualify to actually claim certified amounts. Notwithstanding subsections subsection B and C of this section, any amount of the additional credit under this subdivision that exceeds the taxes otherwise due under this title is not refundable, but may be carried forward to the next five consecutive taxable years. For the purposes of this subdivision, "basic research payments" and "qualified organization base period amount" have the same meanings prescribed by section 41(e) of the internal revenue code without regard to whether the taxpayer is or is not a corporation.

2. Qualified research includes only research conducted in this state, including research conducted at a university in this state and paid for by the taxpayer.

3. If two or more taxpayers, including partners in a partnership and shareholders of an S corporation, as defined in section 1361 of the internal revenue code, share in the eligible expenses, each taxpayer is eligible to receive a proportionate share of the credit.

4. The credit under this section applies only to expenses incurred from and after December 31, 2000.

5. The termination provisions of section 41 of the internal revenue code do not apply.

B. Except as provided by subsection C of this section, If the allowable credit under this section exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the amount of the credit that is claimed for taxable years beginning before January 1, 2022 and that is not used to offset taxes may be carried forward to the next fifteen consecutive taxable years and the amount of the credit that is claimed for taxable years beginning from and after December 31, 2021 and that is not used to offset taxes may be carried forward to the next ten consecutive taxable years. The amount of credit carryforward from taxable years beginning from and after December 31, 2002 that may be used in any taxable year may not exceed the taxpayer's tax liability under this title minus the credit under this section for the current taxable year's qualified research expenses. A taxpayer who carries forward any amount of credit under this subsection may not thereafter claim a refund of any amount of the credit under subsection C of this section.

C. For taxable years beginning from and after December 31, 2009, if a taxpayer who claims a credit under this section employs fewer than one hundred fifty persons in the taxpayer's trade or business and if the allowable credit under this section exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, in lieu of carrying the excess amount of credit forward to subsequent taxable years under subsection B of this section, the taxpayer may elect to receive a refund as follows:

1. The taxpayer must apply to the Arizona commerce authority for qualification for the refund pursuant to section 41-1507 and submit a copy of the authority's certificate of qualification to the department of revenue with the taxpayer's income tax return.

2. The amount of the refund is limited to seventy-five percent of the amount by which the allowable credit under this section exceeds the taxpayer's tax liability under this title for the taxable year. The remainder of the excess amount of the credit is waived.

3. The refund shall be paid in the manner prescribed by section 42-1118.

4. The refund is subject to setoff under section 42-1122.

5. If the department determines that a credit refunded pursuant to this subsection is incorrect or invalid, the excess credit issued may be treated as a tax deficiency pursuant to section 42-1108.END_STATUTE

Sec. 21. Section 43-1083.03, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1083.03. Credit for qualified facilities

A. For taxable years beginning from and after December 31, 2012 through December 31, 2030, a credit is allowed against the taxes imposed by this title for qualifying investment and employment in expanding or locating a qualified facility in this state. To qualify for the credit, after June 30, 2012 the taxpayer must invest in a new qualified facility or expand an existing qualified facility in this state and produce new full-time employment positions where the job duties are associated with the location of the qualifying investment. The taxpayer must meet the employee compensation and employee health benefit requirements prescribed by section 41-1512.

B. The amount of the credit is computed as follows:

1. Ten percent of the lesser of:

(a) The total qualifying investment in the qualified facility.

(b) Either:

(i) If the total qualifying investment is less than $2,000,000,000, $200,000 for each net new full-time employment position that has duties associated with the qualified facility.

(ii) If the total qualifying investment is $2,000,000,000 or more, $300,000 for each net new full-time employment position that has duties associated with the qualified facility.

2. The amount of the credit shall not exceed the postapproval amount determined by the Arizona commerce authority under section 41-1512, subsection P.

3. Subject to subsections G and J I of this section:

(a) The credit amount computed under paragraph 1 of this subsection is apportioned, and the taxpayer shall claim the credit in five equal annual installments in each of five consecutive taxable years.

(b) The taxpayer may claim all five annual installments of a credit that was preapproved before January 1, 2031 by the Arizona commerce authority notwithstanding any intervening repeal or other termination of the credit.

C. To claim the credit the taxpayer must:

1. Conduct a business that qualifies under section 41-1512.

2. Receive preapproval and postapproval from the Arizona commerce authority pursuant to section 41-1512.

3. Submit to the department a copy of a current and valid certification of qualification issued to the taxpayer by the Arizona commerce authority.

D. To be counted for the purposes of the credit, an employee must have been employed with job duties associated with the qualified facility for at least ninety days during the taxable year in a permanent full-time employment position of at least one thousand seven hundred fifty hours per year. An employee who is hired during the last ninety days of the taxable year shall be considered a new employee during the next taxable year. To be counted for the purposes of the credit during the first taxable year of employment, the employee must not have been previously employed by the taxpayer within twelve months before the current date of hire. The terms of employment must comply in all cases with the requirements of section 41-1512 and be certified by the Arizona commerce authority.

E. Co-owners of a business, including partners in a partnership, members of a limited liability company and shareholders of an S corporation, as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all owners of the business may not exceed the amount that would have been allowed for a sole owner of the business.

F. If the allowable tax credit for a taxable year exceeds the income taxes otherwise due on the claimant's income, or if there are no state income taxes due on the claimant's income, the amount of the claim not used as an offset against income taxes shall be paid to the taxpayer in the same manner as a refund under section 42-1118. Refunds made pursuant to this subsection are subject to setoff under section 42-1122. If the department determines that a refund is incorrect or invalid, the excess refund may be treated as a tax deficiency pursuant to section 42-1108.

G. Except as provided by subsection H of this section, If, within five taxable years after first receiving a credit pursuant to this section, the certification of qualification of a business is terminated or revoked under section 41-1512, other than for reasons beyond the control of the business as determined by the Arizona commerce authority, the taxpayer is disqualified from credits under this section in subsequent taxable years. On a determination that the taxpayer has committed fraud or relocated outside of this state within five taxable years after first receiving a credit pursuant to this section, the credits allowed the taxpayer in all taxable years pursuant to this section are subject to recapture pursuant to this subsection. This subsection applies only in the case of the termination or revocation of a certification of qualification under section 41-1512. This subsection does not apply if, in any taxable year, a taxpayer otherwise does not qualify for or fails to claim the credit under this section. The recapture of credits is computed by increasing the amount of taxes imposed in the year following the year of termination or revocation by the full amount of all credits previously allowed under this section.

H. A taxpayer who claims a credit under section 43-1074 may not claim a credit under this section with respect to the same full-time employment positions.

I. H. The department of revenue shall adopt rules and prescribe forms and procedures as necessary for the purposes of this section. The department of revenue and the Arizona commerce authority shall collaborate in adopting rules as necessary to avoid duplication and contradictory requirements while accomplishing the intent and purposes of this section.

J. I. Each taxable year after the postapproval of the credit under section 41-1512, subsection P, when the taxpayer files the taxpayer's income tax return, the taxpayer shall:

1. Notify the department, on a form prescribed by the department, of any full-time employment position for which a credit was claimed under this section and that was vacant for more than one hundred fifty days after the date the full-time employment position was originally filled to the end of that taxable year. The period that a full-time employment position was vacant may not include the period before the full-time employment position was filled for the first time.

2. Reduce the portion of the credit claimed for the taxable year pursuant to subsection B, paragraph 3 of this section by $4,000 for each full-time employment position reported pursuant to paragraph 1 of this subsection. END_STATUTE

Sec. 22. Section 43-1121, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1121. Additions to Arizona gross income; corporations

In computing Arizona taxable income for a corporation, the following amounts shall be added to Arizona gross income:

1. The amount of interest income received on obligations of any state, territory or possession of the United States, or any political subdivision thereof, located outside this state, reduced, for taxable years beginning from and after December 31, 1996, by the amount of any interest on indebtedness and other related expenses that were incurred or continued to purchase or carry those obligations and that are not otherwise deducted or subtracted in arriving at Arizona gross income.

2. The excess of a partner's share of partnership taxable income required to be included under chapter 14, article 2 of this title over the income required to be reported under section 702(a)(8) of the internal revenue code.

3. The excess of a partner's share of partnership losses determined pursuant to section 702(a)(8) of the internal revenue code over the losses allowable under chapter 14, article 2 of this title.

4. The amount of any depreciation allowance allowed pursuant to section 167(a) of the internal revenue code to the extent not previously added.

5. The amount of dividend income received from corporations and allowed as a deduction pursuant to sections 243, 245, 245A and 250(a)(1)(B) of the internal revenue code.

6. Taxes that are based on income paid to states, local governments or foreign governments and that were deducted in computing federal taxable income.

7. Expenses and interest relating to tax-exempt income on indebtedness incurred or continued to purchase or carry obligations the interest on which is wholly exempt from the tax imposed by this title. Financial institutions, as defined in section 6-101, shall be governed by section 43-961, paragraph 2.

8. Commissions, rentals and other amounts paid or accrued to a domestic international sales corporation controlled by the payor corporation if the domestic international sales corporation is not required to report its taxable income to this state because its income is not derived from or attributable to sources within this state. If the domestic international sales corporation is subject to article 4 of this chapter, the department shall prescribe by rule the method of determining the portion of the commissions, rentals and other amounts that are paid or accrued to the controlled domestic international sales corporation and that shall be deducted by the payor. For the purposes of this paragraph, "control" means direct or indirect ownership or control of fifty percent or more of the voting stock of the domestic international sales corporation by the payor corporation.

9. The amount of net operating loss taken pursuant to section 172 of the internal revenue code.

10. The amount of exploration expenses determined pursuant to section 617 of the internal revenue code to the extent that they exceed $75,000 and to the extent that the election is made to defer those expenses not in excess of $75,000.

11. Amortization of costs incurred to install pollution control devices and deducted pursuant to the internal revenue code or the amount of deduction for depreciation taken pursuant to the internal revenue code on pollution control devices for which an election is made pursuant to section 43-1129.

12. The amount of depreciation or amortization of costs of child care facilities deducted pursuant to section 167 or 188 of the internal revenue code for which an election is made to amortize pursuant to section 43-1130.

13. The loss of an insurance company that is exempt under section 43-1201 to the extent that it is included in computing Arizona gross income on a consolidated return pursuant to section 43-947.

14. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property that is pollution control equipment for which a credit was taken under section 43-1170 before taxable year 2026 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.

15. The amount by which the adjusted basis computed under the internal revenue code with respect to property that is pollution control equipment for which a credit was claimed under section 43-1170 taken before taxable year 2026 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43-1170 the section in which the credit was taken.

16. The deduction referred to in section 1341(a)(4) of the internal revenue code for restoration of a substantial amount held under a claim of right.

17. The amount by which a capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds the capital loss carryover allowable pursuant to section 43-1130.01, subsection F.

18. Any wage expenses deducted pursuant to the internal revenue code for which a credit is claimed under section 43-1175 and representing net increases in qualified employment positions for employment of temporary assistance for needy families recipients.

19. Any amount of expenses that were deducted pursuant to the internal revenue code and for which a credit is claimed under section 43-1178.

20. Any amount deducted pursuant to section 170 of the internal revenue code representing contributions to a school tuition organization for which a credit is claimed under section 43-1183 or 43-1184.

21. If a subtraction is or has been taken by the taxpayer under section 43-1124, in the current or a prior taxable year for the full amount of eligible access expenditures paid or incurred to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, article 8, any amount of eligible access expenditures that is recognized under the internal revenue code, including any amount that is amortized according to federal amortization schedules, and that is included in computing Arizona taxable income for the current taxable year.

22. For taxable years beginning from and after December 31, 2017, the amount of any net capital loss included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph:

(a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues.

(b) "Specie" means coins having precious metal content.

23. The amount of any deduction that is claimed in computing Arizona gross income and that represents a donation of a school site for which a credit is claimed under section 43-1181.

24. The amount of any motion picture production costs that was deducted pursuant to the internal revenue code for which a tax credit is claimed under section 43-1165.

25. For taxable years beginning from and after December 31, 2025, the amount of the special depreciation allowance for qualified production property allowed pursuant to section 168(n) of the internal revenue code for the taxable year to the extent not previously added. END_STATUTE

Sec. 23. Section 43-1122, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1122. Subtractions from Arizona gross income; corporations

In computing Arizona taxable income for a corporation, the following amounts shall be subtracted from Arizona gross income:

1. The excess of a partner's share of income required to be included under section 702(a)(8) of the internal revenue code over the income required to be included under chapter 14, article 2 of this title.

2. The excess of a partner's share of partnership losses determined pursuant to chapter 14, article 2 of this title over the losses allowable under section 702(a)(8) of the internal revenue code.

3. The amount allowed by section 43-1025 for contributions during the taxable year of agricultural crops to charitable organizations.

4. The portion of any wages or salaries paid or incurred by the taxpayer for the taxable year that is equal to the amount of the federal work opportunity credit, the empowerment zone employment credit, the credit for employer paid social security taxes on employee cash tips and the Indian employment credit that the taxpayer received under sections 45A, 45B, 51(a) and 1396 of the internal revenue code.

5. With respect to property that is sold or otherwise disposed of during the taxable year by a taxpayer that complied with section 43-1121, paragraph 4 with respect to that property, the amount of depreciation that has been allowed pursuant to section 167(a) of the internal revenue code to the extent that the amount has not already reduced Arizona taxable income in the current taxable year or prior taxable years.

6. With respect to a financial institution as defined in section 6-101, expenses and interest relating to tax-exempt income disallowed pursuant to section 265 of the internal revenue code.

7. Dividends received from another corporation owned or controlled directly or indirectly by a recipient corporation. For the purposes of this paragraph, "control" means direct or indirect ownership or control of fifty percent or more of the voting stock of the payor corporation by the recipient corporation. Dividends shall have the meaning provided in section 316 of the internal revenue code. This subtraction shall apply without regard to section 43-961, paragraph 2 and article 4 of this chapter.

8. Interest income received on obligations of the United States.

9. The amount of dividend income from foreign corporations. For the purposes of this paragraph, gross up income as described in section 78 of the internal revenue code, global intangible low-taxed the income as defined described in section 951A of the internal revenue code and subpart F income as defined in section 952 of the internal revenue code shall be considered foreign dividends.

10. The amount of net operating loss allowed by section 43-1123.

11. The amount of any state income tax refunds received that were included as income in computing federal taxable income.

12. The amount of expense recapture included in income pursuant to section 617 of the internal revenue code for mine exploration expenses.

13. The amount of deferred exploration expenses allowed by section 43-1127.

14. The amount of exploration expenses related to the exploration of oil, gas or geothermal resources, computed in the same manner and on the same basis as a deduction for mine exploration pursuant to section 617 of the internal revenue code. This computation is subject to the adjustments contained in section 43-1121, paragraph 10 and paragraphs 12 and 13 of this section relating to exploration expenses.

15. The amortization of pollution control devices allowed by section 43-1129.

16. The amount of amortization of the cost of child care facilities pursuant to section 43-1130.

17. The amount of income from a domestic international sales corporation required to be included in the income of its shareholders pursuant to section 995 of the internal revenue code.

18. The income of an insurance company that is exempt under section 43-1201 to the extent that it is included in computing Arizona gross income on a consolidated return pursuant to section 43-947.

19. The amount by which a capital loss carryover allowable pursuant to section 43-1130.01, subsection F exceeds the capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code.

20. An amount equal to the depreciation allowable pursuant to section 167(a) of the internal revenue code for the taxable year computed as if the election described in section 168(k)(7) of the internal revenue code had been made for each applicable class of property in the year the property was placed in service.

21. The amount of eligible access expenditures paid or incurred during the taxable year to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, article 8 as provided by section 43-1124.

22. For taxable years beginning from and after December 31, 2017, the amount of any net capital gain included in Arizona gross income for the taxable year that is derived from the exchange of one kind of legal tender for another kind of legal tender. For the purposes of this paragraph:

(a) "Legal tender" means a medium of exchange, including specie, that is authorized by the United States Constitution or Congress to pay debts, public charges, taxes and dues.

(b) "Specie" means coins having precious metal content.

23. With respect to a public service corporation operating a water system or sewage disposal facility, the amount of monies or property received as a contribution in aid of construction. For the purposes of this paragraph:

(a) "Contribution in aid of construction" means any amount of monies or other property contributed to a public service corporation that provides water or sewage disposal services to the extent that the purpose of the contribution is to provide for expanding, improving or replacing the public service corporation's water system or sewage disposal facilities, including any amount of monies or other property contributed to a public service corporation for a water system or sewage disposal facility subject to a contingent obligation to repay the amount, in whole or in part, to the contributor.

(b) "Public service corporation" means a public service corporation as defined in article XV, section 2, Constitution of Arizona, that is regulated by the corporation commission. END_STATUTE

Sec. 24. Repeal

Section 43-1161, Arizona Revised Statutes, is repealed.

Sec. 25. Section 43-1164.04, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1164.04. Credit for qualified facilities

B. The amount of the credit is computed as follows:

1. Ten percent of the lesser of:

(a) The total qualifying investment in the qualified facility.

(b) Either:

(i) If the total qualifying investment is less than $2,000,000,000, $200,000 for each net new full-time employment position that has job duties associated with the qualified facility.

(ii) If the total qualifying investment is $2,000,000,000 or more, $300,000 for each net new full-time employment position that has job duties associated with the qualified facility.

2. The amount of the credit shall not exceed the postapproval amount determined by the Arizona commerce authority under section 41-1512, subsection P.

3. Subject to subsections G and J I of this section:

C. To claim the credit the taxpayer must:

1. Conduct a business that qualifies under section 41-1512.

2. Receive preapproval and postapproval from the Arizona commerce authority pursuant to section 41-1512.

3. Submit to the department a copy of a current and valid certification of qualification issued to the taxpayer by the Arizona commerce authority.

E. Co-owners of a business, including corporate partners in a partnership and members of a limited liability company, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all owners of the business may not exceed the amount that would have been allowed for a sole owner of the business.

H. A taxpayer that claims a credit under section 43-1161 may not claim a credit under this section with respect to the same full-time employment positions.

J. I. Each taxable year after the postapproval of the credit under section 41-1512, subsection P, when the taxpayer files the taxpayer's income tax return, the taxpayer shall:

Sec. 26. Section 43-1168, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1168. Credit for increased research activity

A. A credit is allowed against the taxes imposed by this title in an amount determined pursuant to section 41 of the internal revenue code, except that:

1. The amount of the credit is computed as follows:

(a) Add:

(i) The excess, if any, of the qualified research expenses for the taxable year over the base amount as defined in section 41(c) of the internal revenue code.

(ii) The basic research payments determined under section 41(e)(1)(A) of the internal revenue code.

(b) If the sum computed under subdivision (a) of this paragraph is $2,500,000 or less:

(i) For taxable years beginning before December 31, 2030, the credit is equal to twenty-four percent of that amount.

(ii) For taxable years beginning from and after December 31, 2030, the credit is equal to twenty percent of that amount.

(i) For taxable years beginning before December 31, 2030, the credit is equal to $600,000 plus fifteen percent of any amount exceeding $2,500,000.

(ii) For taxable years beginning from and after December 31, 2030, the credit is equal to $500,000 plus eleven percent of any amount exceeding $2,500,000.

(d) For taxable years beginning from and after December 31, 2011, an additional credit amount is allowed if the taxpayer made basic research payments during the taxable year to a university under the jurisdiction of the Arizona board of regents. The additional credit amount is equal to ten percent of the excess, if any, of the basic research payments over the qualified organization base period amount for the taxable year. The department shall not allow credit amounts under this subdivision and section 43-1074.01, subsection A, paragraph 1, subdivision (c) that exceed, in the aggregate, a combined total of $10,000,000 in any calendar year. Subject to that limit, on application by the taxpayer, the department shall certify credit amounts under this subdivision and section 43-1074.01, subsection A, paragraph 1, subdivision (c) based on priority placement established by the date that the taxpayer filed the application. For taxable years beginning from and after December 31, 2014, any basic research payments used to determine the additional credit under this subdivision must first receive certification from the Arizona commerce authority pursuant to section 41-1507.01. The additional credit amount under this subdivision shall not exceed the amount allowed based on actual basic research payments or the department's certification, whichever is less. If an application, if certified in full, would exceed the $10,000,000 limit, the department shall certify only an amount within that limit. After the limit is attained, the department shall deny any subsequent applications regardless of whether other certified amounts are not actually claimed as a credit or other taxpayers fail to qualify to actually claim certified amounts. Notwithstanding subsections subsection B and C of this section, any amount of the additional credit under this subdivision that exceeds the taxes otherwise due under this title is not refundable, but may be carried forward to the next five consecutive taxable years. For the purposes of this subdivision, "basic research payments" and "qualified organization base period amount" have the same meanings prescribed by section 41(e) of the internal revenue code.

2. Qualified research includes only research conducted in this state, including research conducted at a university in this state and paid for by the taxpayer.

3. If two or more taxpayers, including corporate partners in a partnership, share in the eligible expenses, each taxpayer is eligible to receive a proportionate share of the credit.

4. The credit under this section applies only to expenses incurred from and after December 31, 1993.

5. The termination provisions of section 41 of the internal revenue code do not apply.

B. Except as provided by subsection C of this section, If the allowable credit under this section exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the amount of the credit claimed for taxable years beginning before January 1, 2022 not used to offset taxes may be carried forward to the next fifteen consecutive taxable years, and the amount of the credit claimed for taxable years beginning from and after December 31, 2021 not used to offset taxes may be carried forward to the next ten consecutive taxable years. The amount of credit carryforward from taxable years beginning from and after December 31, 2002 that may be used under this subsection in any taxable year may not exceed the taxpayer's tax liability under this title minus the credit under this section for the current taxable year's qualified research expenses. A taxpayer that carries forward any amount of credit under this subsection may not thereafter claim a refund of any amount of the credit under subsection C of this section.

C. For taxable years beginning from and after December 31, 2009, if a taxpayer that claims a credit under this section employs fewer than one hundred fifty persons in the taxpayer's trade or business and if the allowable credit under this section exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, in lieu of carrying the excess amount of credit forward to subsequent taxable years under subsection B of this section, the taxpayer may elect to receive a refund as follows:

3. The refund shall be paid in the manner prescribed by section 42-1118.

4. The refund is subject to setoff under section 42-1122.

Sec. 27. Repeal

Section 43-1170, Arizona Revised Statutes, is repealed.

Sec. 28. Section 43-1183, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1183. Credit for contributions to school tuition organization

A. Beginning from and after June 30, 2006, a credit is allowed against the taxes imposed by this title for the amount of voluntary cash contributions made by the taxpayer during the taxable year to a school tuition organization that is certified pursuant to chapter 15 of this title at the time of donation.

B. The amount of the credit is the total amount of the taxpayer's contributions for the taxable year under subsection A of this section and is preapproved by the department of revenue pursuant to subsection D of this section.

C. The department of revenue:

1. Shall not allow tax credits under this section and section 20-224.06 that exceed in the aggregate a combined total of $135,000,000 $110,000,000 in fiscal year 2024-2025 2026-2027 and each fiscal year thereafter.

2. Shall preapprove tax credits under this section and section 20-224.06 subject to subsection D of this section.

3. Shall allow the tax credits under this section and section 20-224.06 on a first-come, first-served basis.

D. For the purposes of subsection C, paragraph 2 of this section, before making a contribution to a school tuition organization, the taxpayer under this title or title 20 must notify the school tuition organization of the total amount of contributions that the taxpayer intends to make to the school tuition organization. Before accepting the contribution, the school tuition organization shall request preapproval from the department of revenue for the taxpayer's intended contribution amount. The department of revenue shall preapprove or deny the requested amount within twenty days after receiving the request from the school tuition organization. If the department of revenue preapproves the request, the school tuition organization shall immediately notify the taxpayer, and the department of insurance and financial institutions in the case of a credit under section 20-224.06, that the requested amount was preapproved by the department of revenue. In order to receive a tax credit under this subsection, the taxpayer shall make the contribution to the school tuition organization within twenty days after receiving notice from the school tuition organization that the requested amount was preapproved. If the school tuition organization does not receive the preapproved contribution from the taxpayer within the required twenty days, the school tuition organization shall immediately notify the department of revenue, and the department of insurance and financial institutions in the case of a credit under section 20-224.06, and the department of revenue shall no longer include this preapproved contribution amount when calculating the limit prescribed in subsection C, paragraph 1 of this section.

E. If the allowable tax credit exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the taxpayer may carry the amount of the claim not used to offset the taxes under this title forward for not more than five consecutive taxable years' income tax liability.

F. Co-owners of a business, including corporate partners in a partnership and stockholders of an S corporation as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner.

G. The credit allowed by this section is in lieu of any deduction pursuant to section 170 of the internal revenue code and taken for state tax purposes.

H. A taxpayer shall not claim a credit under this section and also under section 43-1184 with respect to the same contribution.

I. The tax credit is not allowed if the taxpayer designates the taxpayer's contribution to the school tuition organization for the direct benefit of any specific student.

J. The department of revenue, with the cooperation of the department of insurance and financial institutions, shall adopt rules and publish and prescribe forms and procedures necessary to administer this section. END_STATUTE

Sec. 29. Section 48-4203, Arizona Revised Statutes, is amended to read:

START_STATUTE48-4203. Powers and duties of board of directors; reporting requirements; conflict of interest

A. The board of directors, on behalf of the district, may:

1. Adopt and use a corporate seal.

2. Sue and be sued.

3. Enter into contracts, including intergovernmental agreements under title 11, chapter 7, article 3, as necessary to carry out the purposes and requirements of this chapter. The district may contract with a county sports authority established under title 11, chapter 5 to carry out any power of the district.

4. Adopt administrative rules as necessary to administer and operate the district and any property under its jurisdiction.

5. Adopt rules that allow weighted voting by board members and establish conditions for terminating the district.

6. Employ an executive director and administrative and clerical employees, or contract for other management personnel, and prescribe the terms and conditions of their employment as necessary to carry out the purposes of the district.

7. Acquire by any lawful means and operate, maintain, encumber and dispose of real and personal property and interests in property. A district established under section 48-4202, subsection A in a county with a population of less than one million five hundred thousand persons may acquire real property by eminent domain. A district established under section 48-4202, subsection A in a county with a population of one million five hundred thousand persons or more or section 48-4202, subsection B shall not acquire real property by eminent domain. A district established under section 48-4202, subsection C shall not acquire or own real property or interests in real property.

8. Administer trusts declared or established for the district, receive and hold in trust or otherwise property located in or out of this state and, if not otherwise provided, dispose of the property for the benefit of the district.

9. Retain legal counsel and other consultants as necessary to carry out the purposes of the district.

B. The board of directors, on behalf of a district established pursuant to section 48-4202, subsection B, may:

1. Use revenues paid to the district pursuant to section 42-5031 and other revenues the district may receive from other sources, for the purposes set forth in section 48-4204, subsection B.

2. Enter into agreements with developers, contractors, tenants and other users of all or part of a multipurpose facility as determined appropriate.

3. Pledge all or part of the revenues described in section 42-5031, subsection B to secure the district's bonds or other financial obligations issued or incurred under this chapter for the construction of all or part of a multipurpose facility.

C. The board of directors of a district established pursuant to section 48-4202, subsection B shall provide public outreach and education on the purpose and activities of the district, including:

1. Presentations to the governing bodies of the municipalities in the county in which the district is located.

2. Presentations to community, civic and business organizations.

3. Printed or electronic materials that support the purposes of this subsection.

D. The board of directors shall:

1. Appoint from among its members a chairperson, a secretary and such other officers as may be necessary to conduct its business. The board of directors may appoint the chief financial officer of the county as the district treasurer of a countywide district established under section 48-4202, subsection A in a county with a population of less than one million five hundred thousand persons. If the board does not appoint the chief financial officer, the county treasurer is designated ex officio as the treasurer. The board of directors of a district that is established pursuant to section 48-4202, subsection A in a county with a population of one million five hundred thousand persons or more or section 48-4202, subsection B shall designate a member of the board with financial management or accounting experience or a person with whom the board has contracted for financial management as treasurer of the district. The county treasurer is designated ex officio as the treasurer of a district that is established pursuant to section 48-4202, subsection C.

2. Keep and maintain a complete and accurate record of all its proceedings. All proceedings and records of the board shall be open to the public as required by title 38, chapter 3, article 3.1 and title 39, chapter 1.

3. Provide for the use, maintenance and operation of the properties and interests controlled by the district.

E. The board of directors of a district that is established pursuant to section 48-4202, subsection B shall:

1. Determine by agreement the distribution of revenues from operating and using the multipurpose facilities among the municipalities and any participating Indian tribe or community.

2. Ensure that from the amount of budgeted income that remains after paying operating expenses and debt service at least eighty percent of the grants and other financial support provided by the district in a fiscal year is provided for projects that generate transaction privilege tax revenues.

2. 3. Report to the legislature by October 1 of each year regarding the activities, operations, revenues and expenditures of the district for the immediately preceding fiscal year. The board shall submit the annual report to the president of the senate and the speaker of the house of representatives and provide a copy of the report to the secretary of state. At the discretion of the chairpersons of the senate finance committee and the house of representatives ways and means committee, or their successor committees, the committees may hold separate or joint hearings to consider the annual report prepared by the district.

3. 4. Present to the joint legislative committee on capital review each project for the construction or reconstruction of any facility, structure, infrastructure or other improvement to real property of any kind in an amount exceeding $500,000.

F. The board of directors of a district that is established pursuant to section 48-4202, subsection A in a county with a population of more than one million five hundred thousand persons:

1. May enter into agreements with contractors, tenants and other users of all or part of the major league baseball facility or any adjacent building that is owned by the district and operated by the district or the professional baseball franchise organization that occupies the major league baseball facility or adjacent building as determined appropriate, including agreements for reconstructing, equipping, repairing, maintaining or improving the major league baseball facility or adjacent building.

2. On or before November 1 of each year through 2055, shall report to the joint legislative budget committee and the governor's office of strategic planning and budgeting regarding all new projects for reconstructing, equipping, repairing, maintaining or improving a major league baseball facility or any adjacent building that is paid for by the district from the county stadium district fund established pursuant to section 48-4231. The report shall indicate which projects the professional baseball franchise organization contributed monies toward and the amount of the contribution.

G. The directors, officers and employees of the district are subject to title 38, chapter 3, article 8 relating to conflicts of interest.

H. This state and political subdivisions of this state other than the district are not liable for any financial or other obligations of the district and the financial or other obligations do not constitute a debt or liability of this state or any political subdivision of this state, other than the district. END_STATUTE

Sec. 30. Pinal county transportation excise tax monies; retroactivity; definition

A. Notwithstanding any other law, all Pinal county transportation excise tax monies that remain in the escrow account established to hold those monies or that are held by the department of revenue after the processing of refunds is complete must remain in the escrow account or with the department of revenue until otherwise appropriated by the legislature.

B. This section applies retroactively to from and after April 9, 2026.

C. For the purposes of this section, "Pinal county transportation excise tax monies" means net revenues that are collected pursuant to section 42-6106, Arizona Revised Statutes, and that are not distributed pursuant to section 42-6106, subsection D, Arizona Revised Statutes, or refunded pursuant to section 42-1118, Arizona Revised Statutes, and interest earned on those monies.

Sec. 31. Arizona commerce authority; computer data center tax relief; moratorium; retroactivity; delayed repeal

A. Notwithstanding any other law, beginning on July 1, 2026 through June 30, 2029, the Arizona commerce authority may not accept applications for any new computer data center pursuant to section 41-1519, Arizona Revised Statutes, and no new computer data centers qualify for tax relief under section 41-1519, Arizona Revised Statutes.

B. This section applies retroactively to from and after June 30, 2026.

C. This section is repealed from and after June 30, 2029.

Sec. 32. Public infrastructure distribution; interim processing

Eligible requests for payment received by the department of revenue pursuant to section 42-5032.02, Arizona Revised Statutes, as amended by this act, between June 1, 2026 and the effective date of this act shall be processed and paid beginning on the effective date of this act, subject to section 42-5032.02, subsection C, Arizona Revised Statutes, as amended by this act, and section 42-5032.02, subsection I, Arizona Revised Statutes, as added by this act.

Sec. 33. Unemployment insurance operating fund; exemption; calculation; delayed repeal

A. Notwithstanding the contribution rate imposed by section 23-730, Arizona Revised Statutes, for calendar year 2027 each employer with an experience rating account shall pay an amount equal to 3.15 percent of the contributions payable in that calendar quarter to be deposited as follows:

1. In the unemployment insurance operating fund established by subsection C of this section, except not more than $8,000,000 may be deposited in the fund in calendar year 2027.

2. Any monies in excess of the amount listed in paragraph 1 of this subsection, in the unemployment compensation fund established by section 23-701, Arizona Revised Statutes.

B. Notwithstanding section 23-730, Arizona Revised Statutes, the department of economic security shall reduce an employer's contribution by 3.15 percent on a quarterly basis or as otherwise prescribed by law.

C. The unemployment insurance operating fund is established consisting of monies collected or received by the department of economic security pursuant to subsection A of this section. The department of economic security shall administer the fund. Monies in the fund are continuously appropriated and exempt from the provisions of section 35-190, Arizona Revised Statutes, relating to lapsing of appropriations.

D. On notice from the department of economic security, the state treasurer shall invest and divest monies in the unemployment insurance operating fund as provided by section 35-313, Arizona Revised Statutes, and monies earned from investment shall be credited to the unemployment insurance operating fund.

E. The department of economic security shall use monies in the unemployment insurance operating fund to administer the fund and pay expenses for administering the federal-state unemployment compensation program under title 23, chapter 4, Arizona Revised Statutes.

F. The director of the department of economic security may transfer all or a portion of the monies from the unemployment insurance operating fund to the unemployment compensation fund established by section 23-701, Arizona Revised Statutes.

G. This section is repealed from and after December 31, 2027.

Sec. 34. Applicability

A. Sections 20-224.03, 41-1507, 41-1525, 43-1074, 43-1161 and 43-1170, Arizona Revised Statutes, as repealed by this act, apply to taxable years beginning from and after December 31, 2025.

B. Section 42-11111, Arizona Revised Statutes, as amended by this act, applies to tax years beginning from and after December 31, 2026.

C. Section 42-5032.02, subsection C, paragraphs 1, 2 and 3, Arizona Revised Statutes, as added by this act, apply to all agreements entered into pursuant to section 42-5032.02, Arizona Revised Statutes, as amended by this act, regardless of when the agreement was entered into.

Sec. 35. Retroactivity

A. Sections 42-1001, 43-105, 43-1022, 43-1041, 43-1121 and 43-1122, Arizona Revised Statutes, as amended by this act, apply retroactively to taxable years beginning from and after December 31, 2024.

B. Sections 43-1021, 43-1042, 43-1073.01, 43-1074.01 and 43-1168, Arizona Revised Statutes, as amended by this act, apply retroactively to taxable years beginning from and after December 31, 2025.

C. Section 42-5032.02, subsection C, paragraphs 1, 2 and 3, Arizona Revised Statutes, as added by this act, apply retroactively to from and after June 30, 2026.

Sec. 36. Saving clause

A. The repeal of the premium and income tax credits by this act does not affect the continuing validity of any amount of the credit carried forward from previous taxable years for application against subsequent tax liabilities as allowed by prior law.

B. Section 42-5032.02, subsection C, Arizona Revised Statutes, as amended by this act, to reduce the percentage of the total cost of public infrastructure improvements from eighty percent to seventy-five percent applies only to agreements entered on or after the effective date of this act. Agreements entered into before the effective date of this act remain subject to the eighty percent limit in effect at the time of execution for the duration of the agreement.

C. Section 42-5032.02, subsection D and subsection K, paragraph 4, Arizona Revised Statutes, as amended by this act, apply only to certifications filed on or after the effective date of this act. Certifications filed before the effective date of this act remain valid under the thresholds in effect at the time the certification was filed.

D. Section 42-5032.02, subsection G, paragraph 6, Arizona Revised Statutes, as added by this act, applies only to agreements entered into on or after the effective date of this act and does not apply to amendments or changes to agreements entered before the effective date of this act.

E. Section 42-5032.02, subsection G, paragraph 11, Arizona Revised Statutes, as added by this act, applies only to agreements entered into on or after the effective date of this act.

F. Section 42-5032.02, subsection J, Arizona Revised Statutes, as added by this act, applies only to development agreements entered into in connection with agreements entered into pursuant to section 42-5032.02, subsection G, Arizona Revised Statutes, as amended by this act, on or after the effective date of this act.