HB 2824
Initials NM Page 1 Appropriations
ARIZONA HOUSE OF REPRESENTATIVES
Fifty-sixth Legislature
First Regular Session
HB 2824: taxation; 2023-2024
Sponsor: Representative Livingston, LD 28
Committee on Appropriations
Overview
Contains provisions relating to taxation needed to implement the FY 2024 budget.
History
Entity-Level Taxation for Partnerships
By default, partnerships are taxed at the individual business partner level. For Arizona income tax
purposes, partnerships can elect to instead be taxed at the entity level. In this case the taxable
income is the Arizona taxable income of the partnership (A.R.S. § 43-1014).
Income Tax Subtraction for Adoption
Under current statute, an income tax subtraction may be taken for the unreimbursed costs of
adoption. These costs may include: 1) medical costs; 2) hospital costs; 3) adoption counseling
fees; 4) legal fees; 5) agency fees; and 6) other nonrecurring costs of adoption. This income tax
subtraction may not exceed $3,000 and may only be claimed in the tax year (TY) during which
the final adoption order is granted (A.R.S. § 43-1022).
Department of Revenue Integrated Tax System Project Fund (ITSPF)
Laws 2022, Chapter 321 established the ITSPF to implement a multi-year integrated tax system
modernization project under the aegis of the Arizona Department of Revenue (DOR). The fund
consists of: 1) fees assessed from local governments; 2) a portion of the education sales tax; and
3) a portion of the marijuana excise tax. Monies in the fund are subject to legislative appropriation
and will be used solely for the administrative, development and other operating costs incurred in
implementing the integrated tax system modernization project. A legislative intent clause provides
guidelines for the assessment and collection of the fees.
Provisions
Entity-Level Taxation for Partnerships
1. Changes, beginning in TY 2023, the taxable income calculation for partnerships to include
the tax modifications for distributive income passed through to the partners. (Sec. 1)
Income Tax Subtraction for Adoption
2. Increases the income tax subtraction for unreimbursed costs of adoption from $3,000 to
$40,000 in TYs 2023-2025. (Sec. 2)
Integrated Tax System Project Fund (ITSPF)
3. Caps, by legislative intent, the total amount of fees charged for all counties, cities, towns,
councils of government and regional transportation authorities to $6,597,200 in FY 2024 for
the ITSPF. (Sec. 4)
4. Caps, by legislative intent, the total amount of transfers from the 0.6% educational sales tax
to $800,000 in FY 2024 for the ITSPF. (Sec. 4)
☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal Note HB 2824
Initials NM Page 2 Appropriations
5. Caps, by legislative intent, the total amount of transfers from the 16% recreational marijuana
tax to $178,100 in FY 2024 for the ITSPF. (Sec. 4)
Income Tax General Welfare Rebate for Dependents (Dependents Rebate)
6. Creates the onetime individual income tax Dependents Rebate. (Sec. 3)
7. Stipulates that, to qualify for the Dependents Rebate, a taxpayer must have:
a) Been an Arizona resident as of December 21, 2021;
b) Filed a full-year resident tax return;
c) Paid at least $1 in taxes in TYs 2021, 2020 or 2019; and
d) Claimed the dependent tax credit in TY 2021. (Sec. 3)
8. Entitles each qualifying taxpayer to $250 for each dependent under 17 years old at the end of
TY 2021. (Sec. 3)
9. Entitles each qualifying taxpayer to $100 for each dependent 17 years old or older at the end
of TY 2021. (Sec. 3)
10. Limits the amount a taxpayer may receive from the Dependents Rebate to no more than three
dependents. (Sec. 3)
11. Requires the Dependents Rebate to be issued by DOR no later than November 15, 2023.
(Sec. 3)
12. Directs DOR, on or before August 15, 2024, to submit a report to specified legislative entities
with pertinent information about the Dependents Rebate. (Sec. 3)
13. Defines relevant terms. (Sec. 3)
14. Contains an intent clause. (Sec. 3)