Assigned to FICO FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
FACT SHEET FOR S.B. 1092
income tax; currency transactions; effect
Purpose
Allows, beginning TY 2025, individual and corporate taxpayers to subtract capital gains,
and add capital losses, that are derived from a foreign currency or virtual currency transaction to
the individual's or corporation's gross income calculation.
Background
Individual income tax is levied on Arizona residents’ taxable income. The tax base begins
with Arizona gross income, which is equivalent to the taxpayer's federal adjusted gross income.
Statute authorizes various amounts to be added or subtracted when computing an individual's
Arizona adjusted gross income, which is further reduced by standard or itemized deductions to
arrive at Arizona taxable income. An individual may subtract, to the extent not already excluded
from Arizona gross income under the U.S. Internal Revenue Code, the value of virtual currency
received through an airdrop, at the time of the airdrop. A taxpayer who included a gain or loss on
the sale of virtual currency in their Arizona gross income may subtract gas fees from the taxpayer's
Arizona gross income, if the taxpayer did not include any gas fees paid on the purchase of the
virtual currency or did not otherwise deduct the gas fees. A gas fee is a fee paid to the operator of
a virtual network for the use of the network to facilitate a virtual currency or non-fungible token
transaction (A.R.S. Title 43, Chapter 10).
Arizona gross income for a corporation is the same as the corporation's federal taxable
income for the taxable year. To determine a corporation's Arizona taxable income, Arizona gross
income is statutorily adjusted by additions and subtractions of certain expenses and income (A.R.S.
Title 43, Chapter 11).
Virtual currency is a digital representation of value that functions as a medium of exchange,
a unit of account and a store of value other than a representation of the U.S. dollar or a foreign
currency (A.R.S. § 43-1028). According to the U.S. Internal Revenue Service, virtual currency
may be used as payment for goods or services or held for investment purposes. For federal tax
purposes, virtual currency is treated as property and the general tax principles that apply to property
transactions apply to virtual currency transactions (U.S. IRS Notice 2014-21).
If establishing individual and corporate income tax additions and subtractions for foreign
currency and virtual currency transactions results in a change in income tax collections, there may
be a fiscal impact to the state General Fund.
Provisions
1. Requires, beginning TY 2025, an individual taxpayer to add any net capital loss included in
Arizona gross income for the taxable year that is derived from a foreign currency or virtual
currency transaction when computing Arizona adjusted gross income. FACT SHEET
S.B. 1092
Page 2
2. Requires, beginning TY 2025, an individual taxpayer to subtract any net capital gain included
in Arizona gross income for the taxable year that is derived from a foreign currency or virtual
currency transaction when computing Arizona adjusted gross income.
3. Requires, beginning TY 2025, a corporate taxpayer to add any net capital loss included in
Arizona gross income for the taxable year that is derived from a foreign currency or virtual
currency transaction when computing Arizona adjusted gross income.
4. Requires, beginning TY 2025, a corporate taxpayer to subtract any net capital gain included in
Arizona gross income for the taxable year that is derived from a foreign currency or virtual
currency transaction when computing Arizona adjusted gross income.
5. Defines foreign currency as the coin and paper money of a country other than the United States
that is designated as legal tender, that circulates and that is customarily used and accepted as a
medium of exchange in the country of issuance.
6. Becomes effective on the general effective date.
Prepared by Senate Research
January 24, 2024
MG/cs